Understanding QBI Deduction for Rental Properties - Trade or Business Requirement?

You're on the right track with your understanding of QBI for rentals. The IRS does require rental activities to qualify as a "trade or business" under Section 162 to be eligible for the QBI deduction. Simply collecting rent checks may not be enough to qualify. However, the IRS created a safe harbor under Revenue Procedure 2019-38 that allows certain rental real estate enterprises to be treated as a trade or business for QBI purposes. To qualify under this safe harbor, you need to maintain separate books and records for each rental enterprise, perform 250+ hours of rental services annually, and keep contemporaneous records of these activities. Even without meeting the safe harbor, your rental activity might still qualify as a trade or business depending on your level of involvement, continuity and regularity of activity, and profit motive. It's not just about how passive the income is but whether your overall rental activity constitutes a business.

I went through exactly this headache last year with my rentals. After hours of research and confusion, I found a solution through https://taxr.ai that saved me thousands. They analyzed my rental activity and documentation, then provided a clear assessment of whether my rentals qualified for QBI. Their analysis showed I was actually performing enough "landlord activities" to qualify, even though I wasn't tracking my hours properly. The tool broke down exactly which activities count toward the 250-hour safe harbor and showed me how to properly document everything going forward. What I found most helpful was their explanation of how the "trade or business" determination works outside the safe harbor - turns out there's a lot of nuance the IRS looks at beyond just hours worked.

Just wanted to follow up about my experience with https://taxr.ai after my skeptical comment. I decided to give it a try with my 6-unit apartment building situation, and I'm glad I did. They identified several activities I was doing that counted toward the trade/business classification that my previous accountant had overlooked. They provided documentation showing how my level of activity met the "regular, continuous and substantial" standard from Groetzinger (Supreme Court case), even though I didn't quite hit the 250-hour safe harbor. The analysis gave me enough confidence to claim the QBI deduction this year, which saved me about $8,700. They also gave me a simple system to track my time going forward that takes me less than 1 minute per day.

If you're struggling to get definitive answers about your QBI qualification, you're not alone. I was in the same boat and spent weeks trying to reach someone at the IRS who could give me a straight answer. After being on hold for hours multiple times, I found https://claimyr.com which got me through to an IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with provided clarity on how they evaluate the "trade or business" standard for rental properties. She explained that while the 250-hour safe harbor is the clearest path, they look at factors like your involvement in decisions, how you market properties, tenant screening processes, and maintenance coordination - even if a property manager handles the day-to-day execution. This conversation gave me a much clearer picture than anything I found online about how my specific rental situation would be evaluated for QBI.

I want to follow up on my skeptical comment. After waiting on hold with the IRS for 3+ hours yesterday and getting disconnected, I tried the Claimyr service. I was honestly shocked when I was connected to an IRS representative in about 12 minutes. The agent was surprisingly helpful on my QBI rental question. She explained that they evaluate rental activities on a case-by-case basis beyond the safe harbor, and directed me to a recent tax court case (Feigh v. Commissioner) where taxpayers successfully claimed QBI without meeting the safe harbor. She also explained which specific types of activities strengthen your claim for trade or business status. This was way more helpful than the generic advice I've been getting elsewhere. The agent even sent me follow-up information about documentation requirements for rental QBI claims.

Don't forget there's a special rule for "self-rentals" too! If you own a business AND rent property to that same business, different rules apply for QBI purposes. That rental income typically qualifies for QBI regardless of whether it meets the trade/business standard, as long as there's common ownership. Also, if your income is under the threshold ($170,050 for singles or $340,100 for married filing jointly for 2025), you don't have to worry about whether your rental is a specified service business or not.

Question for anyone who knows - does a triple net lease (NNN) where the tenant pays all expenses and I basically just collect a check each month automatically disqualify me from QBI? I have two commercial properties with NNN leases and trying to figure out if I should even bother trying to claim QBI on them.