How do I change from QBI aggregation to non-aggregation?

[wwilcox]

I was considering QBI aggregation and completed my 2023 Form 1049-SR return. I changed my mind and tried to change the election so Turbo Tax would not aggregate but for some reason, I am unable to change the QBI election to stop the aggregation. How can I change this election?

[tagteam]

I'll page Champ @Mike9241 for this. Check back later.

[wwilcox]

Whoops ... my return is a Form 1040-SR,

[Mike9241 · Accepted solution]

The Safe Harbor – Specific Requirements

1. Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise (“RREE”).
2. At least 250 hours of rental services must be performed each year with respect to each RREE.
3. The taxpayer must maintain contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services.  Such records must be made available for inspection at the request of the IRS.

what this means is that without aggregation item 2 - 250 hour requirement would have to be met separately for each real estate activity

Aggregating Separate Properties
As noted, the safe harbor contains a grouping rule that can both help and hurt taxpayers. This would help taxpayers in cases where the 250-hour requirement cannot be satisfied for an individual property but can be satisfied on an aggregate basis.
Generally, a taxpayer may only aggregate “similar” properties. For these purposes, commercial and residential properties are not treated as similar
Once a taxpayer treats interests in commercial properties or residential properties as a single RREE under the safe harbor, the taxpayer must continue to treat interests in all similar properties, including newly acquired properties, as a single RREE to the extent that the taxpayer continues to rely on the safe harbor.
However, a taxpayer that chooses to treat its interest in each residential or commercial property as a separate RREE may choose to treat its interests in all similar commercial or all similar residential properties as a single RREE in a future year.
Mixed-use properties are treated differently. An interest in mixed-use property may be treated as a single RREE or may be bifurcated into separate residential and commercial interests. However, such a project cannot be aggregated with other mixed-use properties.
For purposes of the safe harbor, mixed-use property is defined as a single building that combines residential and commercial units.
The Safe Harbor – Exclusions
The safe harbor sets out a number of exclusions,
1. The Safe Harbor Only Applies to Rental Real Estate.
2. The Safe Harbor Does Not Apply to Triple Net Leases.
3. The Safe Harbor Does Not Apply to Owner Residences.
4. Real Estate Leased to an Affiliated Trade or Business.

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how to undo aggregation (I assume you're not using the basic online app because that does not cover rental real estate) for schedule E page 1 real estate activities go to the rental section in Turbotax continue until you get to the property listing. then one by one you'll need to edit them.

the next page is a summary for that activity click on the blue icon "done with rental property" 

if nothing on the other situations page applies click "continue" 

if no section 179 carryover click "continue"

on the "your profit loss results so far" click "continue"

you should be at the QBI safe harbor page

there are 3 questions

1) you don't qualify  - check this if you don't meet the requirements for this property 

2) yes but for this property only - check this if you meet all the requirements for this property (ignore the word only) 

3) yes for an enterprise  - uncheck this one

if this doesn't work contact support to figure out the issue. 

[wwilcox]

I rechecked my answers to the QBI safe harbor page and they were all correct. However, I did find where I incorrectly answer a question on the page titled "We see you have Section 199A income". I check the "The income comes from another business" instead of "The income comes from the partnership that generated this K-1". After correcting this answer, Turbo Tax no longer computed the aggregation. However, It appears Turbo Tax generated phantom K-1's  for two of my partnerships that where part of the aggregation process and they are listed on Form 8995-A. I tried deleting the phantom K-1's in the "Forms in My Return" page but each time I tried deleting the form, Turbo Tax shut down without asking if I wanted to save my file. Because of the phantom K-1's showing on Form 8995-A, my QBI deduction is overstated. How do I correct this error?

[wwilcox]

Also know, the phantom K-1's are only listed in QBI Component section of the "Forms in My Return" page (see photo below). The number of K-1's listed in the "Forms in My Return" page is correct.