QBI for rental real estate

[garycarols]

Thank you, in advance, for helping with this!  Last tax season, I had a $1200 profit on my rental real estate.  I did not get the QBI.  With the research I've done, I think I was eligible for the QBI.  

1)  I thought TurboTax automatically calculated and applied any QBI--are there additional pages/questions somewhere that must completed for TurboTax to apply the QBI?

2)  Has the requirement to send a statement to the IRS with the tax return been omitted for 2019?

3)  Since the statement, above, was required in 2018, if I file an amended return for 2018 to get my QBI, must I include said statement?  How does one attach a statement to the TurboTax return when e-filed?

[MarilynG1 · Accepted solution]

If you are using TurboTax Desktop, you can link to the QBI Worksheet from the Schedule E Worksheet.  TurboTax should prepare this for you automatically, but you can do so manually in FORMS mode .

There is a question in the Interview about QBI, but you may have missed it.  You will be able to Efile with this statement in your return. 

This link gives detailed info on the QBI deduction. 

To Amend your 2018 return and claim a QBI credit, you will need to open your return in TurboTax Windows for 2018 and manually use the FORMS, as above, after indicating you want to amend in 'Other Tax Situations'. 

Click the link for instructions on How to Amend a 2018 Return. 

[garycarols]

Thank you for answering each of my several questions!  You're appreciated!   🙂

[MarilynG1]

You are most Welcome!

[manbeing]

@MarilynG1 

Hi, does Turbotax apply Safe Harbor (IRS Notice 2019-07) to treat rental real estate as a trade or business for the purpose of Section 199A ? or Use Section 162 to determine the trade or business?

The reason I need clarifications on it is that Turbotax doesn't warn or alert customers to keep the record of minimal 250 hours rental property service which is required if the Safe Harbor is applied. I didn't meet this  '250 hours' requirement in 2019 so I need to know if I will still be qualified this QBI 20% deduction on rental property income if my rentals are prices at a fair market price.

Thanks.

[VictoriaD75]

If you’re a real estate professional for tax purposes (that is, over 50% of the personal services you performed in business during the tax year were in a real estate business you materially participated in for more than 750 hours that same year) then your rental income qualifies for the QBI deduction, provided all the other conditions are met.

TurboTax applies the safe harbor treatment based on your response to the questions regarding the rental real estate activity and determines eligibility for QBI accordingly.

Under the proposed safe harbor, a “rental real estate enterprise” would be treated as a trade or business for purposes of Sec. 199A if at least 250 hours of services are performed each tax year with respect to the enterprise. The IRS says this includes services performed by owners, employees, and independent contractors and time spent on maintenance, repairs, rent collection, payment of expenses, provision of services to tenants, and efforts to rent the property. However, hours spent in the owner’s capacity as an investor, such as arranging financing, procuring property, reviewing financial statements or reports on operations, and traveling to and from the real estate will not be considered hours of service with respect to the enterprise.

A rental real estate enterprise is defined, for purposes of the safe harbor, as an interest in real property held for the production of rents. A rental real estate enterprise may consist of multiple properties. The interest must be held directly or through a disregarded entity. Taxpayers either must treat each property held for the production of rents as a separate enterprise or must treat all similar properties held for the production of rents as a single enterprise. Commercial and residential real estate cannot be combined in the same enterprise.

The proposed safe harbor would require that separate books and records be maintained for the rental real estate enterprise. Property leased under a triple net lease or used by the taxpayer (including an owner or beneficiary of a relevant passthrough entity) as a residence for any part of the year under Sec. 280A would not be eligible under the proposed safe harbor.

Qualified Business Income Deduction

[honem]

I have several rental real estate properties that are aggregated for QBI, and I get an error message when doing my 2019 federal review that I cannot e-file because TurboTax doesn't support the "QBI Rental Real Estate Enterprise Statement", which must be printed out, signed, and mailed along with a paper copy of my return.

[VictoriaD75]

The aggregation of rentals (that is only applicable to real estate professionals) is not supported by TurboTax.

See additional information in the link below:

Aggregation of Properties

[honem]

The aggregation I'm talking about is the one allowed under the Safe Harbor, which does not only apply to real estate professionals. Anyone who fits the criteria can aggregate.

https://www.journalofaccountancy.com/news/2019/sep/rental-real-estate-safe-harbor-qbi-deduction-[soc...

[DavidS127]

The IRS requires a "manually signed and dated" safe harbor election statement for rental activities.   That Rental Real Estate Enterprise Statement is the "safe harbor" statement for your combined (aggregated) rental properties.  Unfortunately, TurboTax does not support a PDF attachment of a signed safe harbor election.  As a result, you are required to print and mail your tax return in order to submit the signed and dated "safe harbor" statement required by the IRS.

@honem

[LLL2010]

Hi Honem,

I am trying to file my return by Oct 15, 2020. I encounter the same problem as you did, because of the QBI statement, Turbo Tax does not allow me to e-filing my return. 

Did you find a ways if I can e-file the return?

Thanks

--Li

[LLL2010]

Hi David, 

Your answer is so helful! 

Since I will file my return to meet the Oct 15, 2020 deadline, is there anything new regarding this?

That is, will I be able to e-file my return when I need to include the safe harbor statement with my return?

Thanks a lot!

--Li

[honem]

Unfortunately, I think you still have to print and mail in your return in this situation.

[LLL2010]

Thanks!

--Li

[PBEJ]

Is there an update on this topic? Will taxpayers still need to file paper returns for 2020 if they are taking the safe harbor election?