Claim On Your 2018 Taxes
Many business owners will benefit from the new 20% Qualified Business Income (QBI) deduction created by the 2017 Tax Cuts and Jobs Act (TCJA). However, until last week, it was unclear if landlords who earned a profit from rental real estate were considered business owners and therefore able to claim this deduction.
The Treasury Department and IRS released Notice 2019-07 which explains the “safe harbor” test to determine your eligibility. Using the chart below, if your answers to the questions match the ones shown, you qualify!
You must attach a statement to your tax return claiming your section 199A deduction and confirming you have satisfied all requirements.
*Rental Services can be performed by you or
independent contractors, agents, or employees
Rental services for this deduction include:
- Advertising to rent or lease the real estate
- Negotiating and executing leases
- Verifying information contained in prospective tenant applications
- Collecting rent
- Daily operation, maintenance, and repair of the property
- Management of the real estate
- Purchasing materials
- Supervision of independent contractors, agents, or employees
Rental services for this deduction do not include:
- Financial or investment management activities
- Time spend to obtain the property
- Planning, managing, or constructing long-term capital improvements
- Time spent traveling to and from the property