Is rental income from a single family home considered QBI for tax deduction purposes?

This is a common point of confusion! Your online research is generally correct - traditional rental activities reported on Schedule E typically don't qualify as QBI unless certain conditions are met. For rental income to qualify as QBI, it needs to rise to the level of a "trade or business" under Section 162 of the tax code. Most passive rental activities don't meet this standard. However, there are important exceptions: The IRS created a safe harbor (Revenue Procedure 2019-38) where rental real estate can qualify as a trade or business for QBI purposes if you: maintain separate books for each property, perform 250+ hours of rental services annually, and keep contemporaneous records of these activities. But this typically requires more involvement than a single rental property with minimal management. Another exception is if the rental is to a business you own (self-rental), but that doesn't sound like your situation. Your accountant might be applying one of these exceptions, or they might be taking an aggressive position. I'd recommend asking them specifically which provision they're using to qualify your rental as QBI.

I went through this exact same confusion last year with my rental property! After doing tons of research and getting frustrated with conflicting advice, I found this service called taxr.ai (https://taxr.ai) that analyzes tax documents and provides clarity on complicated situations like QBI qualification. I uploaded my previous tax return and some details about my rental property, and they provided a detailed analysis explaining exactly why my rental income didn't qualify for QBI (in my case) and what specific criteria would need to be met for it to qualify. They cited all the relevant tax code sections and even provided case examples. Saved me from potentially taking a risky position that my previous accountant had suggested.

Just wanted to follow up - I decided to try taxr.ai after seeing the recommendation here. I was in a similar situation with a duplex rental and conflicting advice about QBI eligibility. The analysis I got was really eye-opening! They showed me that while my basic rental income didn't qualify for QBI, some of my property management activities could potentially be structured differently to qualify under the safe harbor rules. They provided clear documentation I could share with my accountant, including the specific requirements I'd need to meet in terms of hours worked and record-keeping. My accountant actually thanked me for bringing him this information since it helped him understand the nuances better too. Definitely worth checking out if you're stuck in this QBI confusion like I was!

If you need clarification directly from the IRS on QBI for rental properties, good luck trying to get through to them on the phone! I spent 3 weeks trying to reach someone who could answer my question about QBI for my rental. Then I found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in under an hour. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that unless I met the safe harbor requirements (250+ hours of rental services) or was a real estate professional, my single family home rental income wouldn't qualify as QBI. She explained that many accountants misunderstand this rule because it has several exceptions and was relatively new when the Tax Cuts and Jobs Act passed. Getting that official clarification saved me from an audit risk and gave me confidence in my filing position.

I need to eat my words from my previous comment. After waiting on hold with the IRS for 3 hours yesterday and getting disconnected AGAIN, I decided to try Claimyr out of desperation. I was absolutely shocked when I got a call back in about 45 minutes connecting me to an actual IRS agent. The agent walked me through the exact requirements for QBI on rental properties and confirmed that my single-family home rental doesn't qualify since I only spend about 30 hours a year dealing with it. She explained that unless I meet specific criteria for the safe harbor or am a real estate professional, I can't claim the QBI deduction. Having this straight from the IRS gives me confidence to push back on my tax preparer who's been incorrectly including this on my return for the past two years. Might need to file amended returns now, but better than getting audited!

Something important no one has mentioned yet - there's also the "self-rental rule" where if you rent property to a business you materially participate in (like your own S-corp or partnership), that rental income CAN qualify as QBI even if you're not a real estate professional. This is a common legitimate way rental income qualifies for QBI. Maybe your accountant is thinking of this rule?

Slightly off topic but related - I have 2 rental properties and use a property management company. Do the hours the property management company spends count toward the 250 hour requirement for the safe harbor? Or only hours I personally spend?

I'm dealing with a similar situation with my rental property and wanted to share what I learned after researching this extensively. The key issue is that regular rental income from a single-family home typically does NOT qualify as QBI unless specific conditions are met. Based on my research and conversations with multiple tax professionals, here are the main ways rental income can qualify for QBI: 1. **Real Estate Professional Status** - You need to spend 750+ hours annually in real estate activities and more than half your working time in real estate trades/businesses. 2. **Safe Harbor Rule (Rev. Proc. 2019-38)** - You must spend 250+ hours annually on rental services, maintain separate books for each property, and keep detailed contemporaneous records. 3. **Self-Rental Exception** - When you rent to a business you materially participate in. 4. **Triple Net Lease Exception** - For certain commercial lease arrangements. Since you mentioned spending less than 50 hours annually on your property, none of these exceptions would apply to your situation. Your accountant may be applying outdated guidance or misunderstanding the current rules. I'd strongly recommend getting the specific tax code section your accountant is relying on. The QBI deduction is heavily scrutinized by the IRS, so you want to make sure any position taken has solid legal backing.