Don’t Miss Out on the 20% Qualified Business Deduction for Rental Activities!

The Tax Cuts and Jobs Act (TCJA) allows for certain businesses to take a deduction equal to 20% of their income! This is applicable to rental real estate activities as long as you meet certain conditions or prove the activity rises to the IRS’s definition of a trade or business. To help rental real estate owners determine if their rental activity qualifies for this deduction, the IRS has issued proposed regulations with a safe harbor. To qualify, you must meet the following conditions:

  • Separate books/financial reports are maintained for each rental activity,
  • 250 hours or more of "rental services" are performed per year for the activity, and
  • The taxpayer maintains detailed records, including time reports regarding hours of all services performed, description of all services performed, dates on which such services are performed and who performed the services.

The Service provided some examples of “rental services” that would count towards the 250 hours. These include advertising to rent, negotiating and executing leases, verifying tenant applications, collecting rent, performing daily operation and maintenance, managing the real estate, purchasing materials, and supervising employees and independent contractors.

If you own rental properties, don’t miss out on this deduction. Contact us to determine if you qualify.

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