Can schedule E rental real estate income qualify as pass through income for 2018? My other IRS 1040 income sources are only interest/dividends, retirement income, & cap gains. No wage income.
I just bought @Amanda Han 's new book and according to the video that came with it the 20% pass through will apply to shed e income regardless of how its owned. Amanda, this video was made right before the end of the year. Is this still your interpretation?
@NA N Keith In order to qualify your rental activities have to be considered a "trade or business," which the IRS has conveniently never defined for us. I would just be as active as you are comfortable with in your rentals and make sure you document your activity.
I have no idea whatsoever about your situation but given that you don't have any W-2 or other business income you may qualify as a real estate professional if you spend more than 750 hours a year on your rentals.
Check with your tax adviser.
@NA N Keith
Tax professionals are split about whether the 20% deduction will apply to real estate investors.
As Logan pointed out - you must be a trade or business to be eligible for the 20% deduction.
The IRS should be providing some guidelines in the coming months that will shed some more light.
I would not say that tax professionals are split. We're mostly in agreement on these points:
- Schedule E does qualify as pass-through, generally speaking
- Rentals will need to pass the "trade or business" test that has not been defined (and may not be defined for awhile), as @Logan Allec mentioned
- As a result, not all Schedule E rentals will end up qualifying for 20%, and we're waiting for the IRS/Congress guidance
- The more you participate in your real estate business, the better your chances
Keep in mind that the 20% deduction is totally irrelevant if you're showing losses on Schedule E, after all expenses and depreciation.