Schedule E "Qualified Trade or Business"

Forum|Forum|2 years ago
September 21, 2023
2 replies
15 views

First time doing client with 2 rental properties. There's a Qualified Business Income Deduction Smart Worksheet and has question A1 that asks "Is this activity a qualified trade or business Yes or No".
Can someone educate me on this please?

ProSeries Professional

This topic has been closed for replies.

ljr

Level 9

The question to determine if it a qualified trade or business is the same for 2 rental properties as it is for 1 rental property. More than likely the answer is no if they just own and rent out a property or two. Is it in their own names or did they create an LLC or S corp to hold the properties. How much time do they spend "managing" the properties? You have to see if it rises to the level of a "business". Active or Material participation. Do they spend more than 750 hours per year in which they materially participate? if no, then then it would be a no. Most rental properties generate a loss so the QBI would not help their tax return.

T

Terry53029

Intuit Community Champion

You need to talk with your clients to see how involved they are with the rentals. There is a safe harbor for rentals that qualifies them for the QBI. See link for more info.

https://www.irs.gov/newsroom/irs-finalizes-safe-harbor-to-allow-rental-real-estate-to-qualify-as-a-business-for-qualified-business-income-deduction.

Also see this from Intuit.

https://proconnect.intuit.com/support/en-us/help-article/federal-taxes/understanding-qbi-rental-real-estate-safe-harbor/L7MuvBDG0_US_en_US?uid=lmt735id.

Sign up

Login with SSO

Let's get you signed in

Login with SSO