Two rental properties have net loss and two have net income. If you take QBI deduction for the two net income properties, do I have to take QBI for the other two homes?

Forum|Forum|7 years ago
June 3, 2019
1 reply
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If I select "Yes, this income is QBI" for the homes with the net loss, I notice my taxes go up so that is why I am asking. All are single family homes rented out the full year at fair market rates and I actively manage all four properties (handle repairs, finding new tenants, leases, etc). Homes are all owned by me in sole ownership and I don't have a property management company. I keep individual records across each property (separate bank accounts, receipts, book keeping, etc). I keep general activity information, dates, cost, etc but I don't keep records around time (how long it took me or someone else to perform activity) so I can't say definitively I spend 250 hours on each home individually. If you combine all activities across the four rental homes, without question, I spend at least 250 hours per year managing the properties.

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Best answer by DanielV01

Yes you need to include them. The IRS will want consistent accounting. If the properties that have a gain qualify for QBI, then the rental properties that have a loss reduce your rental gains that can qualify for the QBI deduction. Because you are determining that your rentals are a business venture, you are able to report expenses (and even have a reportable loss) through Schedule E. If, on the other hand, you were to determine that your rental is not a qualified trade or business, you are also stating it is not a for-profit activity and you would not be allowed to claim expenses or take a loss. And being able to claim the expenses on your return is more valuable from a tax standpoint than losing some QBI because you have to include the loss in your calculation.

DanielV01Answer

Level 15

Yes you need to include them. The IRS will want consistent accounting. If the properties that have a gain qualify for QBI, then the rental properties that have a loss reduce your rental gains that can qualify for the QBI deduction. Because you are determining that your rentals are a business venture, you are able to report expenses (and even have a reportable loss) through Schedule E. If, on the other hand, you were to determine that your rental is not a qualified trade or business, you are also stating it is not a for-profit activity and you would not be allowed to claim expenses or take a loss. And being able to claim the expenses on your return is more valuable from a tax standpoint than losing some QBI because you have to include the loss in your calculation.

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