Rental real estate safe harbor. Aggregation of business

[kkezir]

Info: I work a W2 job and my husband works our rentals (~20 properties).  Working the rentals (rehabs, make-readies, maintenance) is his full-time job.  In addition to my W2 job I do a fair amount with the rentals also (showings, screenings, move-ins, move-outs, rent collection, books, and field/schedule tenant requests/maintenance). We are sole proprietor.  We/he qualifies as a real estate professional due to the amount of work he does.  We classify as a business or trade and the qualified business income deduction (QBID) based on the IRS guidelines.

1. We do not spend 250hrs on each property each year.  Some get more (a lot more) attention than others in different years.  To use the safe harbor for QBID do you need to spend 250hrs on each property or do they need to be aggregated (I did not aggregate last year)?

However, aggregation was chosen even though I chose "I elect to use a safe harbor for the property on its own (irs notice 2019-07) on the screen that asks "Do you want to use a safe harbor to qualify this property for a deduction?"

This has kicked out the ability to efile because the Rental Real Estate Safe Harbor Statement -199A must be signed and mailed.

Thanks

[Carl]

Here's the bottom line.

It apparent to me that you qualify for the QBI with 20 plus rental properties managed by one person. The 250 hours can be ignored since more than 50% of his work related time is spent doing just that - dealing with the rental properties.

If you want the QBI, then aggregate. Period. If you don't want the QBI, don't aggregate. Personally, based on the information you've provided and my interpretation of it, I'd aggregate and continue doing so in future years so long as I continue to meet the requirements for QBI by aggregating.

[kkezir]

Carl thanks so much for your reply.  Is the QBI safe harbor 250hr rule based on a per property?  And since we don't spend 250hr/yr on each property... that is why we need to aggregate (to form a real estate enterprise)

[Carl]

Exactly. Based on the fact that one person is managing 20 plus rentals I have no doubt they spend more than half of the work related income producing time dealing with rental property directly. Additionally, the rental income produces more than half of the income received by that person from other sources. So aggregating makes sense here for the QBI - even if they don't qualify as an RE pro.