Rental Real Estate

The IRS issued Rev. Proc. 2019-38 to provide a safe harbor under which a real estate enterprise will be treated as a trade or business for purposes of Sec. 199A, and will qualify for the deduction. The taxpayer must maintain records, including time reports or logs. If you have rental property and you meet the requirements, a signed certification must be attached to your tax return.

The requirements are:

  1. To maintain separate books and records to reflect income and expenses for each rental and
  2. To spend at least 250 hours/year performing services with respect to the rental.

Qualified activities: advertising to rent, negotiating leases, verifying information in the tenant applications, collecting rents, maintaining the property, managing the real estate, purchasing items for the property, supervising employees or independent contractors

Non-qualified activities: arranging financing, procuring property, studying and reviewing financial statements or reports on operations, planning, managing or constructing long-term capital improvements, time spent traveling back and forth to the property