Bob Jablonsky & Associates Blog

Plano TX – Does Rental Real Estate Income Qualify for the QBI Deduction?

by | Nov 26, 2019

In December of 2017, the Tax Cuts and Jobs Act (TCJA) introduced a new “Qualified Business Income Deduction” (QBID) under IRS Section 199A. The QBID provided a deduction of up to 20% of qualifying income on the tax return and enable major tax savings to small business clients that qualified.  . This deduction was applicable to business income including qualifying Schedule C, Partnership, and S-Corp Income.

Does income on Rental Real Estate qualify for the QBI Deduction?

The answer is like many questions related to tax law is that it depends. Not all rental real estate income will qualify.  It will qualify for QBID is if it meets any of the following three tests:

1. The rental real estate rises to the level of a section 162 trade or business. Triple Net Leases are specifically excluded.
2. The rental real estate is a rental real estate enterprise meeting the requirements of the safe harbor provided in Rev Proc 2019-38.
3. The rental of property is to a commonly controlled trade or business operating by an individual or business operated by an individual or passthrough entity as described in section 1.199A-1(b)(14) a.k.a. – self rental.

Whether a business, particularly a real estate investment by an individual, rises to the level of business under Section 162 can be a gray area based on the facts of the investor and investments. In addition, for investors that do qualify and are above the income thresholds ($315,00 for MFJ taxpayers and $157,500 for other filers) the calculation may have more complexity that can limit or eliminate the deduction.

Still, if you are a real estate investor with several properties and who may qualify for the QBI Deduction, it is worthwhile to learn more to determine if you qualify for the deduction.

Do you Need Help?
If you would like help from a firm that specializes in working with realtors and real estate investors, as well as helping those who have IRS problems, please give us a call at (972) 821-1991 or send me an email at bob@jablonskyandassociates.com.

 

Bob Jablonsky is the founder of Bob Jablonsky & Associates. He has spent his career helping taxpayers resolve tax issues and get back on track with the IRS. In addition to tax resolution his firm also prepares hundreds of tax returns every year for both individuals and small to mid-sized businesses.

Bob is an IRS Enrolled Agent (EA), which is an elite credential issued by the Internal Revenue Service to professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation, and representation matters. An Enrolled Agent license is the highest credential awarded by the IRS and is recognized across all 50 states. Additionally he is a CMA, or Certified Management Accountant, a designation for financial controllers and CFOs (Chief Financial Officers), as well as an Advanced Certified Quickbooks Pro Advisor.

Get in touch

1900 Jay Ell Drive
Richardson, TX 75081

Bob@jablonskyandassociates.com

(972) 821-1991

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