Level 10

QBI for retired individual

Forum|Forum|1 month ago
June 1, 2026
3 replies
90 views

TP is 81 and an owner of rental real estate (an apartment building.) I amended her 2024 1040 to reflect her "claim" that she has a profit motive in this activity and therefore qualifies for the QBI deduction. She does not meet the RRE safe harbor. However, she can prove that she has a profit motive with facts. The 1040 X was filed in March. The IRS sent a letter in April stating "we changed your account for 2024 to correct your Qualified Business Income Deduction." So, I feel like the IRS is going to challenge this deduction

Her occupation was listed as Retired on the Original 1040. It would have been better to list it as "RE Investor" or something similar on the 1040. I didn't change it.

Tax Talk

sjrcpa

Level 15

It doesn't matter if the taxpayer is "retired". I've never tried to use that safe harbor.

What matters is whether the apartment building is a trade or business.

How many apartments? Management Company? etc.

The more I know the more I don’t know.

S

strongsilenceAuthor

Level 10

Thank you.

It is a triplex.

A management company is used. She reviews monthly financials, meets with the management company, etc. There won't be an issue of proving business activity.

The prior CPA, a highly competent tax preparer, did not treat it as a business. I discussed this with the client, and she agree that the QBI deductions is right.

Did I wake a sleeping dog? My fear is that the IRS is delaying the amended return because it has questions about a change in treatment from passive to business.

T

TaxGuyBill

Level 15

@strongsilence wrote:

a change in treatment from passive to business.

Even if it is a business, it most likely is still passive, so don't mix up the terminology and rules.

T

TaxGuyBill

Level 15

What is your question? Personally, I doubt if entering "retired" as opposed to "real estate investor" affected anything. Although merely having a profit motive doesn't necessarily mean it is a "trade or business" with QBI.

Did the IRS letter or does the IRS Account say they were disallowing the QBI deduction?

As for whether it qualifies for QBI: This is ONLY my PERSONAL opinion: The IRS showed their opinion when the introduced the 250 hour Safe Harbor for rentals.

While there are situations that a single rental can rise to the level of a Trade or Business, in my OPINION, the IRS's 250 hour Safe Harbor shows what extent the IRS considers a Trade or Business.

I am certainly NOT saying the taxpayer needs to meet to meet the 250 hour Safe Harbor; it can definitely be a Section 162 business with less than 250 hours. HOWEVER, if the IRS says that 250 hours (among other requirements) is "safe", how far away from that is the taxpayer? For example, if the situation has 200 hours of work, it seems quite reasonable it could qualify, depending on the facts-and-circumstances. If it only has 50 hours of work ... in my personal OPINION it seem doubtful it would qualify.

S

strongsilenceAuthor

Level 10

What is your question?

The 2023 tax return has a loss from this rental activity. Should I have filed both simultaneously in order to show the loss carryforward? Do you think I should have prepared and filed 2023 and 2024 together? Should the 2023 amended tax return be filed, even though - because of that loss carryforward - it would harm the taxpayer?

T

TaxGuyBill

Level 15

Did it qualify for QBI in 2023? When calculating your 2024 QBI did you account for the 2023 loss carryforward (and if not, does that mean your 2024 return is wrong)?

If it qualifies for QBI in a year, you can't just pick-and-choose which years to claim it to avoid the QBI loss.

BobKamman

Level 15

The IRS sent a letter in April stating "we changed your account for 2024 to correct your Qualified Business Income Deduction."

That looks like the standard language they use when they have made the adjustment and are about to issue a refund check. Have you tried checking

https://www.irs.gov/filing/wheres-my-amended-return

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