​How to Handle Multiple Rental Activities and the 199A Deduction

Courtesy of stock photo from pexel

There’s a lot of confusion out there around your rental activity and Section 199A. Your Section 199A considerations multiply when you have multiple rental activities. Here’s what you need to consider:

• Are your rental activities multiple trades or businesses, or one trade or business?
• Can you aggregate the rentals for Section 199A purposes? Do you want to?
• How does the Section 199A rental safe harbor impact your Section 199A deduction if you use it?

 
Whether your rental activities are each a trade or business, or they constitute one trade or business, is inherently based on the facts of your particular situation. 
 
This determination is an important factor for you if any one rental activity  doesn’t rise to the level of a trade or business, but all the rental activities do rise to the level of a trade or business.

​One of the factors the IRS looks to when determining whether a rental activity is a trade or business is the number of properties rented.

Aggregation
 
The Section 199A regulations allow you to aggregate multiple trades or businesses such that you treat the aggregated group as one trade or business for determining your Section 199A deduction. This is an important consideration if one or more of your rental businesses have insufficient wages or unadjusted basis in assets (UBIA) to get the maximum Section 199A deduction for that property.
 
The big wrinkle that we tax plan around is the type of rental business.

Rental Safe Harbor
 
Along with the final regulations, the IRS gave you an optional safe harbor to deem your rental activities as qualifying for the Section 199A deduction. Is the safe harbor the best strategy?
 
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