Can I qualify for QBI deduction with a single rental property that's fully managed by a management company?

You're right that there's been a lot of confusion around QBI and rental properties! The good news is that the IRS has provided some clarity since the deduction was first introduced. For a rental property to qualify for the QBI deduction, it generally needs to rise to the level of a "trade or business" under tax code section 162. The IRS created a safe harbor (Revenue Procedure 2019-38) specifically for rental real estate enterprises. Even a single property can qualify if you meet certain requirements: 1. You maintain separate books and records for the rental activity 2. You perform 250+ hours of "rental services" annually (this is where your situation gets tricky) 3. You keep contemporaneous records of these services Here's where the property management complicates things - those 250 hours can include time spent by you OR your agents/employees (including property managers), but you need documentation of their time. The activities can include maintenance, repairs, collecting rent, screening tenants, and daily operation. Even if you don't meet the safe harbor requirements, you might still qualify based on facts and circumstances. Some tax professionals believe a rental managed like a business (separate bank accounts, proper documentation, profit motive) can qualify even without meeting the safe harbor.

I went through a similar situation last year with my rental property. After tons of research, I ended up using https://taxr.ai to analyze my property management statements and extract the qualifying activities. They have this cool feature where they can review your management company statements and identify which activities would count toward the 250-hour requirement for QBI. What I really liked is that they flagged several activities my property manager was doing that I hadn't realized qualified as "rental services" under the IRS safe harbor. They even helped me format the documentation in a way that would satisfy IRS requirements if I ever got audited. Saved me a ton of time trying to figure out if I qualified or not.

Just wanted to update after trying taxr.ai for my rental property documentation. I was really skeptical (as you can see from my previous comment), but it actually worked surprisingly well for my situation. I uploaded my management statements from the past year, and it identified about 215 hours of qualifying activities. I wasn't quite at the 250-hour threshold, but the analysis showed me specific additional activities I could document myself (like time researching capital improvements, meeting with my accountant about the property, etc.) to reach the safe harbor. I ended up qualifying for QBI and saving about $3,700 on my taxes this year! The report it generated also gave me confidence that I could defend the deduction if audited, which was my biggest concern. Definitely worth checking out if you're in a similar situation with a property management company.

If you're trying to reach the IRS to get clarification on whether your rental property qualifies for QBI, good luck! I spent WEEKS trying to get through to someone who could actually answer my question about this exact situation. Always busy signals or being on hold for hours only to get disconnected. I eventually used https://claimyr.com to get through to an IRS agent. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c - basically they have a system that navigates the IRS phone tree and waits on hold for you, then calls you when they get a human on the line. The IRS agent I spoke with confirmed that even with a single rental property managed by a property management company, I could qualify for QBI if I could document sufficient "rental service" hours (including the hours spent by my property manager). That clarification alone saved me thousands on my taxes.

I need to eat some humble pie here. After posting my skeptical comment, I decided to try Claimyr myself because I've been trying to get clarification on a different QBI rental issue for months with no luck. I got through to an IRS tax law specialist in about 45 minutes (compared to my previous attempts where I spent literally hours on hold). The agent was able to point me to the specific guidance in Revenue Procedure 2019-38 that addressed my situation. While they did say "consult your tax professional" for my specific case, they were incredibly helpful in explaining how the safe harbor works. For what it's worth, the agent confirmed that property management hours DO count toward the 250-hour requirement if properly documented, which was my main question. Definitely changed my perspective on both the service and my QBI eligibility.

Just wanted to add my experience as a landlord with a single rental property. I initially didn't claim QBI because my accountant wasn't sure if I qualified. The next year, I switched accountants and the new one said I absolutely did qualify under the "facts and circumstances" test, even without meeting the safe harbor requirements. He pointed out that running a rental through a management company actually strengthens the argument that it's a business rather than an investment, since you're operating it in a businesslike manner with professional management. We documented everything properly and I was able to claim the QBI deduction for both years (filed an amended return for the previous year). One tip: keep a separate business credit card and checking account for ALL rental transactions. This makes it much easier to show you're running it as a business rather than an investment.

Something nobody has mentioned yet - if your income is below certain thresholds, you might qualify for QBI even without meeting the safe harbor! For 2025 filing, the phase-out begins at $182,100 for single filers or $364,200 for married filing jointly. Below those thresholds, the IRS tends to be less stringent about the exact nature of the "trade or business" requirement for rental properties. My CPA advised that with good documentation and business-like treatment of the property (separate accounts, proper record-keeping), a single rental property has a strong case for QBI qualification if you're under those income limits.

Based on your situation, you have a decent chance of qualifying for the QBI deduction, especially since your rental income appears to be well below the income thresholds mentioned by Giovanni. Here are a few key points for your specific case: 1. **Documentation is crucial**: Start requesting detailed activity logs from your property management company. Even if they don't currently track hours, most can provide estimates for time spent on tenant placement, maintenance coordination, inspections, etc. 2. **Business treatment matters**: Since you're using a professional management company and treating this as a business operation, you're already on the right track. Make sure you have separate bank accounts and maintain good records. 3. **Don't overlook your own time**: While the management company handles day-to-day operations, any time you spend reviewing their reports, making decisions about repairs, researching the rental market, or meeting with your accountant about the property can count toward qualifying activities. 4. **Consider the facts and circumstances test**: Even if you can't document 250 hours, your situation (professional management, business bank accounts, profit motive) suggests you're operating a trade or business rather than just holding an investment property. Given that you're earning $2,350/month in rent, the QBI deduction could save you several hundred to over a thousand dollars depending on your tax bracket. Definitely worth pursuing with proper documentation!