All Forum Posts by: Raj Sid

@Raj Sid , 

If the business activity is a qualified business activity (only trade or business qualifies), you get the 20% deduction even if you are passively involved in the business. 

This is the direct quote from the Committee Report.

"Qualified business income means, generally, all net business income from a passive business activity plus the capital percentage of net business income from an active business activity," ...."To determine qualified business income requires a calculation of net business income or loss from each of an individual's passive business activities and active business activities." 

But the activity has to be trade or business. 

 Generally, there are various other limitations on the passive losses and losses in general such as an At-risk rule. But if we are assuming that the passive business activity gives you passive income, you will be entitled to 20% deduction. 

For rental, If you lease a property to one tenant under a long-term triple net lease, the activity is not trade or business. the more activity and owner duties you take, the more likely you will qualify for the deduction. 

@Raj Sid

Yes, a Rental activity may qualify for the 20% deduction.

If your rental activity is qualified for 20% deduction, it does not have to be in an LLC.

Rental income without LLC  also qualifies for 20% deduction ( if your rental qualifies- not all rental might qualify). Activity has to be a trade or business. We are still waiting for a clear guidance from IRS on this 199A ( 20% deduction). Expected to come out soon. 

Generally, rental activity is not trade or business. But the court has gone both directions. Treating just one rental as a trade or business and treating multiple rentals as not a trade or business. So, with right planning we are hopeful that 20% can be taken on the rental net income. 

Bottomline, you dont need LLC. 20% deduction is also for a sole prop.

The article you are mentioning is short term rentals, that will normally qualify for trade or business.