Residential Rental Activities and the new 20% Qualified Business Income Deduction

February 20, 2019 by Jeremy Rufsvold
Tax Services

One provision that generates lots of attention is the 20% Qualified Business Income (QBI) deduction for small businesses.  A huge area of uncertainty is whether a residential rental activity qualifies for the deduction because it may not pass the threshold of being an active trade or business. 

Recent guidance provides a safe harbor under which these activities may qualify.  The safe harbor excludes certain rental real estate arrangements such as a triple net lease or real estate used by the taxpayer as a residence for any part of the year.

Failing to satisfy the requirements of the safe harbor doesn’t necessarily disqualify the activity from the 20% deduction.  There are several factors to consider and a framework to address these situations.  If you have any questions on how this may affect you, please contact our office at (952) 476-7100.