It depends. Rental properties are usually treated as passive activities, and passive activities are excluded from the definition of a qualified trade or business. However, rentals that qualify as trades or businesses under IRC § 162 are not considered passive, which means they could potentially qualify for the QBI deduction.
Generally, this means each rental real estate enterprise (a rental property or group of similar rental properties, including K-1 rental income) must satisfy these requirements:
- Each enterprise maintains its own books and records to track income and expenses;
- At least 250 hours of rental services are performed per year per enterprise; and
- Contemporaneous records of services performed are kept which includes who performed the service, description of service, the date of the service, and how long it took (who, what, when, and how long).
Rental services can be performed by the owners or by their employees, independent contractors, or agents.
Read more about how a rental property can qualify for QBI here: Can I get the QBI deduction on rental income?
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