Finally A Gift From Lawmakers

Your gift from Lawmakers is the new safe harbor for section 199A rental properties.  If you qualify you can take it, its there for you to.  According to the trade or business rule, your rental property  profits can create the deduction. And now, under an alternative rule, you can use the newly created IRS safe harbor to make your rentals qualify for the deduction. 

​When you meet the new safe-harbor rules, the IRS deems your rental a trade or business with net rental profits that are QBI for the Section 199A tax deduction. But you may not want to use the safe-harbor rules, because they contain some onerous provisions. Also, you may not qualify to use the safe harbor. No problem. You can simply use the second method and win your 199A tax deduction using the existing trade or business tax law rules.

Under the new Section 199A rental real estate safe harbor (and only for this Section 199A safe harbor), each of your rental real estate properties individually or as a group (if you so choose) falls into one of the following categories:
 

1. Residential real estate enterprise
2. Commercial real estate enterprise
3. Triple net lease real estate

 
Grouping rule. You (or your pass-through entity) must either
 

• treat each rental property as a separate enterprise, or
• treat all similar properties as a single enterprise.

​Safe-Harbor Requirements
 
Solely for Section 199A purposes, the IRS will treat your rental real estate enterprise as a trade or business if you (or your pass-through entity) can satisfy the following requirements:
 

1. You maintain separate books and records that reflect the income and expenses of each rental real estate enterprise.
2. You perform 250 or more hours of “rental services” during the tax year.
3. You maintain contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed, (ii) description of all services performed, (iii) dates on which such services were performed, and (iv) who performed the services. (Note: The contemporaneous records rule does not apply to tax years beginning before January 1, 2019—but don’t let this give you false hope; you still need proof.)