Single rental property - trade or business?

Forum|Forum|3 years ago
January 29, 2023
1 reply
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This explanation is confusing to me for whether my rental property qualifies for QBI (I know it does not qualify for Safe Harbor).

If you are renting property that requires very infrequent interaction with the tenants and maintenance to the property, the courts have generally found this type of activity is not a "trade or business". On the other hand, if you rent out property that requires frequent tenant interactions or maintenance services, this type of activity is generally classified as a "trade or business."

What this tells me is my rental income is not QBI-qualified if I have a rental that is in good condition so doesn't require much maintenance, and my renter is happy. However, if my rental was falling apart and I had to go repair things constantly, and/or my renter was unhappy and calling me all the time, then it would be QBI-qualified? Am I interpreting that correctly?

PatriciaV

Employee

Yes, you are correct that most single-family rental properties are considered passive activities that do not qualify for QBI. In general, you must spend at least 250 hours per year providing rental services for your rental property to qualify as a trade or business. And, yes, if you spend excessive time and money on your rental property, you may qualify for QBI, probably under the Safe Harbor provisions.

For more info, see

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