Under TCJA Rental Income Qualifies for 20% Business Deduction - QBI

By
Services for Real Estate Pros with Tax Houston, LLC EA123233

On January 18th the IRS Issued its final regulations for the New Tax Law's Qualified Business Deduction QBI. The Tax Cuts and Jobs Act TCJA is quite complicated and the QBI even more. So, I spent the weekend reading the final installment of the QBI regulations. The bottom line is that the IRS will allow renters of real property to qualify for the 20% business deduction. The IRS has even given a safe harbor election to ensure that taxpayers feel safe in doing so until the regulations are passed into law. I highly recommend speaking with a tax professional to get the details specific to your unique tax situation. However, if you called my office I would likely inform you of the basic requirements that the IRS has outlined to qualify for the Safe Harbor election.

(A) Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise;

(B) For taxable years beginning prior to January 1, 2023, 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental enterprise. For taxable years beginning after December 31, 2022, in any three of the five consecutive taxable years that end with the taxable year (or in each year for an enterprise held for less than five years), 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental real estate enterprise; and

(C) The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services. Such records are to be made available for inspection at the request of the IRS. The contemporaneous records requirement will not apply to taxable years beginning prior to January 1, 2019.

 

To read more about the Safe Harbor Election: Rental Real Estate Business Deduction Safe Harbor - QBI

 

For Tax Advice You Can Trust:
Call Joseph Zimmer, EA, MBA or Jay Finn, CPA at: (713) 520-0010

Visit our Website at: https://www.taxhouston.com/

Email: Joe@TaxHouston.com

Comments (8)

Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

This is valuable stuff to know... thank you!

Jan 23, 2019 03:58 AM
Joseph Zimmer

I am glad you found the blog useful. The new tax law TCJA and its QBI deduction can be very helpful for Real Estate Agents. Another thing to know is that the 250 hours can be hours spent by contractors (repairs, lawn service, accountants etc.). It doesn't have to be the property owner that is putting in the hours.  

Jan 24, 2019 03:23 AM
Mel Ahrens, MBA, Kelly Right Real Estate
Kelly Right Real Estate - Hood River, OR
Customized Choices for your Real Estate Needs

Welcome to Active Rain, a great place to learn, share, and network.  Thanks for the info; the weekend, my condolences.

Jan 23, 2019 11:17 AM
Joseph Zimmer

Ha. Thank you for your condolences. I am very pleased to share tax advice and am eager to figure out how things work on Active Rain.   

Jan 24, 2019 03:19 AM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Welcome to the ActiveRain community. Congratulations on your first post.

Jan 23, 2019 02:29 PM
Joseph Zimmer

Thank You,


It seems like a great bunch. I hope to contribute a valuable tax  blog that folks in real estate will find usefull.

Jan 24, 2019 03:16 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Joseph Zimmer welcome to ActiveRain, and congratulations on successfully posting your first blog on this site.

Jan 24, 2019 03:44 PM
Joseph Zimmer

Thank You for welcoming me. I am pleased to have your support and look forward to networking with the ActiveRain community in the future.

Jan 24, 2019 11:44 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for sharing the information. Welcome to active rain 

Jan 24, 2019 05:12 PM
Joseph Zimmer

Thank You for welcoming me. Active Rain seems like a very nice community of professionals, I hope my blog can become useful to real estate agents and look forward to growing my IRS Tax Rep business here.

Jan 24, 2019 11:42 PM
The Woodland Team of Texas
The Woodland Companies - Austin, TX
Land Specialists

Welcome to ActiveRain, I hope that your participation here helps your business to grow.
Btw, I followed your blog, and would be honored if you followed mine.
Thank You!

Jan 24, 2019 09:21 PM
Joseph Zimmer

Thank You for following my tax blog. I have followed your blog too. It is quite nice, and unexpected, to have been welcomed by the Active Rain community and look forward to spending many hours here growing my IRS tax representation business. 

Jan 24, 2019 11:39 PM
Bob Crane
Woodland Management Service / Woodland Real Estate, EXP - Stevens Point, WI
Forestland Experts! 715-204-9671

Welcome to Active Rain, looking forward to reading many more of your posts, let me know if there is anything that I can do to help as you get started here.
All the best of success to you.
Bob

Feb 19, 2019 09:33 PM