On Friday, January 20, 2019 the IRS issued final regulations as well as some additional guidance in regard to the QBI deduction for 2018. Much of the final regulations simply make the temporary regulations from August 8, 2018 permanent. However, there is some additional guidance for persons involved in real estate (information on real estate & QBI deduction) below. We've also provided some checklists below that can help you determine if you qualify for the Qualified Business Income Deduction (QBID).
Taxpayers can continue to apply the trade or business tests, which is the “regular, continuous, for profit” 3-part test of Code Section 162. However, in IRS Notice 2019-07 they also provided a safe harbor to qualify rental real estate activities for the QBI deduction that meet these three tests (applied separately to each property, or similarly at the taxpayer’s choice for all properties of the same type: residential or commercial):
1. Maintain separate books and records for each rental activity;
2. Perform at least 250 hours (or agent/employee or subcontractor) of rental services for each year for each rental activity; and
3. Maintain contemporaneous records, logs or similar documents showing time, description, dates and who performed the services.
Do You Qualify for the QBI?
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