It depends. IRS Notice 2019-07 established a new safe harbor for rental real estate. A rental real estate enterprise can be treated as a trade of business for QBI purposes it they met certain requirements.
The following requirements must be meet to qualify for safe harbor:
- Maintenance of separate books and records to report income and expenses of each rental real estate enterprise.
- For tax years beginning before January 1, 2023, 250 or more hours of rental services must be performed each year.
- Beginning on January 1, 2019, the taxpayer must maintain records with details about the services, including hours, description, dates and who performed the services.
- The taxpayer or RPE attaches a statement to the return filed for the tax year(s) the safe harbor is relied upon.
IRS Notice 2019-07 page 8, defines "Rental services." "Rental services for purpose of this revenue procedure include: (i) advertising to rent or lease the real estate; (ii) negotiating and executing leases; (iii) verifying information contained in prospective tenant applications; (iv) collection of rent; (v) daily operation, maintenance, and repair of the property; (vi) management of the real estate; (vii) purchase of materials; and (viii) supervision of employees and independent contractors. Rental services may be performed by owners or by employees, agents, and/or independent contractors of the owners. The term rental services does not include financial or investment management activities, such as arranging financing; procuring property; studying and reviewing financial statements or reports on operations; planning, managing, or constructing long-term capital improvements; or hours spent traveling to and from the real estate.
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