topic Does a loss from Sch E have to be counted in QBI? in Business & farm

Does a loss from Sch E have to be counted in QBI?

DJFR — Sat, 01 Jun 2019 18:21:02 GMT

Took my 2018 1040 to my CPA to go over. CPA said loss ($2K) from Sch E Rental should NOT be counted with QBI, was hurting my situation, and explained why in detail. While I know how to manually remove the amount from QBI using forms, what question in the step-by-step process allows me to 'not count' the Sch E loss?

If I must use forms to remove the loss, which form is best to start with?

If it matters, I have two Sch C businesses (profits) and the Sch E loss.

While I see questions in the community about making sure to count Sch E profits in QBI, I see none addressing a Sch E loss.

Thanks!

"should NOT be counted with QBI, was hurting my situation...

Lisa995 — Sat, 01 Jun 2019 18:21:04 GMT

"should NOT be counted with QBI, was hurting my situation, and explained why in detail."

Either your rental qualifies as a trade or business, and qualifies for QBI, or it doesn't....

Im more curious as to how or why this is hurting your situation.

As far as 'qualifies as a trade or business' I have now f...

DJFR — Sat, 01 Jun 2019 18:21:05 GMT

As far as 'qualifies as a trade or business' I have now found several explanations. It seems that having a single-family home that is being rented out can go either way in the courts, all depending on tenant interaction and maintenance to the property. My CPA's point is we are not putting any time or money into the rental, so it doesn't qualify. The tenant is steady and the loss is produced by depreciation only.

'hurting my situation' just means my refund is slightly smaller if I count the loss in the QBI.

We may be speaking about different things...you say "QBI...

Lisa995 — Sat, 01 Jun 2019 18:21:08 GMT

We may be speaking about different things...you say "QBI loss", when I'm guessing you mean is you don't get the QBI deduction from the rental profit. If the rental shows a loss, you wouldn't have any QBI deduction to change anything on your tax return.

If you don't put in the hours, you probably don't qualify for the QBI deduction....a single family home rental property may be difficult to qualify, its hard to put the 250hours/yr (approx. 4/hr per week) into one rental property.

Yes, my "loss" refers to Sch E only. TurboTax is countin...

DJFR — Sat, 01 Jun 2019 18:21:09 GMT

Yes, my "loss" refers to Sch E only. TurboTax is counting the Sch E loss ($2k) against the combined profit from the two Sch C profits, thus reducing my QBI deduction.

Ahhh, ok, Sch C income is involved in the scenario, I un...

Lisa995 — Sat, 01 Jun 2019 18:21:10 GMT

Ahhh, ok, Sch C income is involved in the scenario, I understand now.

I.m assuming that what is happening here is that the loss...

Zbucklyo — Sat, 01 Jun 2019 18:21:11 GMT

I.m assuming that what is happening here is that the loss from the rental property is being added to (meaning reducing) the QBI income from the Schedule C businesses, resulting in a lower QBI deduction than you would get if this were excluded. To change this in TurboTax, there is a question at the end of the rental section in step-by-step that asks it if is QBI income. Just answer no.

N.B. I doubt that there is a single rental property in America with a loss that qualifies as QBI-eligible, but plenty with positive net income.

Perfect. I found it. Thank you!

DJFR — Sat, 01 Jun 2019 18:21:13 GMT

Perfect. I found it. Thank you!