New Qualified Business Income (QBI) deduction for rental property income qualifications

[manbeing]

TurboTax listed three conditions that need to be met to use 20% QBI deductions for rental property income this year. They are

1) The activity must be a "trade or business."

2) The activity must be US-based.

3) The income must not be "wages."

TurboTax doesn't mention the 250 hrs service time. According to IRS, 'For taxable years through 2022, at least 250 hours of services are performed each year for the enterprise.'

Is Turbotax wrong? or 250hrs wouldn't need to be counted for 2018 since this is a new tax act?

[Ashby · Accepted solution]

The 250 hour rule is what defines #1. This new guidance was just released on 1/18/19 and was meant to help clarify what would constitute a trade or business when it comes to rental activities.

Understand that the 250 hours doesn't have to be completed by the taxpayer, but agents, contractors, and employees can all count towards the requirement.

Ultimately, individuals who don’t meet these safe harbor requirements still have the opportunity to “prove” that they have such a business (but they will bear the burden of backing up their claim (possibly in court) should the IRS stop in for a visit).