Husband and Wife run Rental. Is it QBI?

[Duane590]

Does a schedule E rental property run solely by a husband and wife qualify for the 20% income reduction? They do all the accounting and repair/maint. scehduling.

[Davidrenggli · Accepted solution]

Yes if they meet the following requirements.

.03 Safe harbor. Solely for the purposes of section 199A, a rental real estate
enterprise will be treated as a trade or business if the following requirements are
satisfied during the taxable year with respect to the rental real estate enterprise:
(A) Separate books and records are maintained to reflect income and
expenses for each rental real estate enterprise;
(B) For taxable years beginning prior to January 1, 2023, 250 or more hours
of rental services are performed (as described in this revenue procedure)
per year with respect to the rental enterprise. For taxable years beginning
after December 31, 2022, in any three of the five consecutive taxable
years that end with the taxable year (or in each year for an enterprise held
for less than five years), 250 or more hours of rental services are
performed (as described in this revenue procedure) per year with respect
to the rental real estate enterprise; and
(C) The taxpayer maintains contemporaneous records, including time reports,
logs, or similar documents, regarding the following: (i) hours of all services
performed; (ii) description of all services performed; (iii) dates on which
such services were performed; and (iv) who performed the services. Such
records are to be made available for inspection at the request of the IRS.
The contemporaneous records requirement will not apply to taxable years
beginning prior to January 1, 2019.

.04 Rental services. Rental services for purpose of this revenue procedure
include: (i) advertising to rent or lease the real estate; (ii) negotiating and executing
leases; (iii) verifying information contained in prospective tenant applications; (iv)
collection of rent; (v) daily operation, maintenance, and repair of the property; (vi)
management of the real estate; (vii) purchase of materials; and (viii) supervision of
employees and independent contractors. Rental services may be performed by owners
or by employees, agents, and/or independent contractors of the owners. The term
rental services does not include financial or investment management activities, such as
arranging financing; procuring property; studying and reviewing financial statements or
reports on operations; planning, managing, or constructing long-term capital
improvements; or hours spent traveling to and from the real estate.

[sjrcpa]

David posted the safe harbor. It can also qualify if, based on facts and circustances, it rises to the level of a trade or business.