QBI Safe Harbor.: TT already had me do a Schedule E. Should I now delete that and do a Schedule C instead?

Forum|Forum|2 years ago
April 11, 2024
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After answering all of the questions for a Schedule E, Turbo Tax then asked about QBI Safe Harbor. Based on the criteria, my rental property qualifies so should I now delete the Schedule E and do a Schedule C for business expenses instead?

KrisD15

Schedule C is BUSINESS income.

You will be charged Self-Employment (FICA) tax on your income.

The income will be considered as "Earned Income". (Could increase or decrease credits, would affect social security)

Schedule E is PASSIVE income.

You are not subject to Self-Employment tax.

The income is not considered as earned. (Does not affect taxability of Social Security)

There is the option of claiming the safe harbor for rentals which allows you to expense (some) assets rather than depreciate them. This can be done WITHOUT making the rental (Schedule E) a business (Schedule C).

Is this what you want to do, claim safe harbor for expensing?

Here is a link that might help.

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AndriAuthor

In order to qualify for QBI, my understanding was that my rental activities constitute a trade or business. That's why I thought I might need to delete the Schedule E and do a Schedule C instead. What I hear you saying is that with QBI the government will treat it like a business but I still only need to file Schedule E. Is that correct?

AndriAuthor

To answer your question, yes, is there a way to expense some assets without doing a Schedule C?

Mike9241

QBI safe harbor is for rental real estate activities that would be reported on schedule E. It's a tax regulation that, if the conditions are met, allows you to treat rental real estate activities as qualifying for the QBI that the IRS can not challenge. If you don't meet all the conditions, that doesn't mean the activities don't qualify for the QBI. But in that case, the IRS can challenge the QBI deduction.

https://www.cbiz.com/insights/articles/article-details/the-rental-real-estate-safe-harbor-for-qbi-deductions-and-its-questionable-benefits#:~:text=On%20Sep.%2024%2C%202019%2C%20the%20IRS%20finalized%20a,conditions%20that%20appeared%20previously%20under%20a%20proposed%20procedure.