Qualified Business Income Tax Deduction for Residential Rentals

[Steve Young]

Hello, I have several out-of-state residential rental properties that are managed by local property management companies. The property mgt companies make decisions on minor maintenance and repairs, but I make decisions on major maint and repairs such as painting, roof repair/replacement, chimney cleaning, and appliance purchases. The properties are owned by me as individual and I am not set up as sole proprietor for these properties. For the 2018 tax year, I did not take the qualified business income (QBI) deduction because the total net result of the properties was a loss, so there was no QBI deduction benefit. For the 2019 tax year, for these rentals, I have a total net income of about $3300. Based on my rental property participation status, and also I didn’t use/report QBI in the 2018 tax return, can i take the QBI for 2019? Also, once I take the QBI for 2019, will I have to continue to take it every year afterward even if I may not have a positive net income in some of the years after 2019? Thank you.

[Natalie Kolodij]

Originally posted by @Steve Young:

Hello, I have several out-of-state residential rental properties that are managed by local property management companies. The property mgt companies make decisions on minor maintenance and repairs, but I make decisions on major maint and repairs such as painting, roof repair/replacement, chimney cleaning, and appliance purchases. The properties are owned by me as individual and I am not set up as sole proprietor for these properties. For the 2018 tax year, I did not take the qualified business income (QBI) deduction because the total net result of the properties was a loss, so there was no QBI deduction benefit. For the 2019 tax year, for these rentals, I have a total net income of about $3300. Based on my rental property participation status, and also I didn’t use/report QBI in the 2018 tax return, can i take the QBI for 2019? Also, once I take the QBI for 2019, will I have to continue to take it every year afterward even if I may not have a positive net income in some of the years after 2019? Thank you.

 It was still wrong to not take it if you qualified. 

If you ARE a trade or business you need to treat your activities that way, it's not a some yeras we are some years we're not situation. Or choosing to apply it IF you think it will help. You either are or aren't. 

It would have generated a QBI loss carry forward. 

I would suggest working with a tax professional who can walk you through the deduction and it's impacts.