IRA contribution when QBI is my only income - Is this be a T-TAX flaw?

Forum|Forum|1 year ago
July 6, 2024
2 replies
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Hello,

I am in a situation where I own rental properties and I meet the criteria for a QBI (200 hours a year, actively involved, etc.) Basically it is a full time job. The way my business is set up, is a sole proprietorship and my only income is the QBI (besides some dividends and capital gains). Based on that, my understanding is that I should be able to contribute to an IRA. When I go to do that in TTax, I am told that my EARNED INCOME is ZERO, thus I can contribute ZERO dollars to an IRA. Basically TTax wants explicit earned income (self-employed, 1099, W2 etc.). Isn't this INCORRECT and should be fixed?

thank you in advance

Bsch4477

Employee

Do you report your income on Sch C?

franksrentalAuthor

Hello Bsch,

That was exactly my point. If I report it on Schedule C I would call it 'explicit' earned income. In that case obviously everything works as expected. So that is a work-around: my QBI pays me $10,000, I report it on Schedule C and I can contribute.

My question was: if I don't report anything on Schedule C, shouldn't my QBI income implicitly be considered as earned income (or at least part of it)? Thus allowing me to contribute to an IRA?

VolvoGirl

Employee

If you don't report it on schedule C then where were you reporting it? On Schedule E for rentals? You only get Earned Income on Schedule C Net Profit of $400 or more.

VolvoGirl

Employee

Found this FAQ. QBI on Rental Income

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-credits-deductions/get-qbi-deduction-rental-income/L9ZkHYnUZ_US_en_US?uid=lyablg2y

franksrentalAuthor

thanks Volvogirl, I was inexact, I did mark the 750+ hours (and not 200 as I posted) and the other requirements Basically Turbotax aknowledged that I do qualify for QBI and adjusted my taxable income accordingly.

My question is again: now that I did actively participated in the QBI I should be able to contribute to an IRA, doesn't make sense? Not according to TTax which considers that a $0 earned income. I believe that is INCORRECT.