If the rental property income is not qualified for QBI Safe Harbor, how could it be qualified for QBI deduction?

[manbeing]

I have been confused about this for many years as I saw multiple posts here saying that they were not eligible to use Safe Harbor so they applied QBI deduction.

The bottom line is rental property is passive activity which is not qualified to use QBI deduction, then IRS published a safe Harbor (including 250 hrs rental property service and other two conditions), so as long as you meet these three conditions, you can go ahead to use QBI deduction.

So how could some landlords here can still apply QBI deduction even though they don't pass the Safe Harbor?

I think the questions TT asks are confusing the users because it firstly asks you if you are qualified to use QBI safe harbor, and even you answer 'No', the next question it asks you is 'Is this QBI'?   If a landlord cannot pass the Safe Harbor test, how could the rental property income will be QBI qualified?

[DaveF1006]

According to this IRS publication, If an interest in real estate fails to satisfy all the requirements of the safe harbor, it may still be treated as a trade or business for purposes of the section 199A deduction if it otherwise meets the definition of a trade or business in the section 199A regulations. This means that if you carry on the rental business with regularity, continuity and with a profit motive, you may qualify for QBI.

[Mike9241 · Accepted solution]

all the QBI safe harbor means is that if you ACTUALLY meet all the stipulations then the iRS can not challenge the QBI deduction.  The IRS can ask for proof that you in fact meet all of them. if you do not then there could be issues because you in effect would have committed perjury.  if you took a QBI deduction but don't qualify or don't elect the Safe Harbor election then, if audited,  IRS will see if you meet the 199A definition of a QB.