§199A QBI Deduction

Do your rentals qualify for the 20% QBI deduction?

The qualified business income (QBI) deduction can take up to 20% of your rental profit off your federal taxable income. Answer four questions about how you run your rentals and enter your income; we’ll check the IRS safe harbor and estimate the deduction and the tax it saves.

A deduction on rental profit
The lets you deduct up to 20% of your net rental profit (after ). If the rental shows a loss, there’s nothing to take 20% of.
Your rentals must count as a business
The easiest way to prove that is the IRS : 250+ hours of rental services, separate books, a time log, and no triple-net or personal-use property.
High incomes get limited
Above $403,500 of taxable income (married filing jointly, 2026), the deduction is limited by wages the rentals pay and the property’s , fully so at $553,500. Below that, you get the full 20%.

Schedule E on last year’s return ends with your net rental income, and Form 1040 shows your taxable income. The QBI for rentals guide walks through who qualifies with worked examples.

Safe harbor checklist (Rev. Proc. 2019-38)

Meet all four and the IRS treats your rentals as a business for the QBI deduction. Hours from you, employees, contractors, and property managers all count.

Hours of rental services this year

hrs/yr

Separate books and records?

Rental income and expenses tracked separately from personal finances.

Time log kept as you go?

Daily or weekly log of services (date, hours, who, what).

Excludes triple-net leases and personal-use property?

The safe harbor excludes triple-net leases (the tenant pays all operating costs, tax, and insurance) and property you use personally for more than the greater of 14 days a year or 10% of rented days.

Your tax situation

Your income decides whether you get the full 20%. Your last return has these numbers.

Filing status

Taxable income (before QBI)

Federal tax bracket

Net rental income (after depreciation)

Tax saved each year

$0/yr

You don’t meet the safe harbor yet. The most fixable gaps are usually reaching 250+ hours and starting a time log. With those in place, your $15,000 of rental profit would generate about $720 of tax savings.

Safe harbor

Not met

Need a time log.

Rental profit (QBI)

$15,000

net rental income after depreciation

Income vs the limit

Under (full deduction)

Married range: $403,500 → $553,500

QBI deduction

safe harbor not met

Tax saved per year

at your 24% federal bracket

What this means

You’d still need a time log kept as the work happens to use the safe harbor. Without it, rentals can still qualify if they rise to a trade or business on their own (the standard), but that’s a facts-and-circumstances call for a CPA.

QBI is a federal deduction, and most states don’t allow it, so this leaves state tax out.

The QBI rules in 5 points

The deduction is 20% of qualified business income, subtracted from taxable income. For rentals, QBI is net rental income on Schedule E, after depreciation.

The safe harbor (Rev. Proc. 2019-38) requires 250+ hours of rental services per enterprise each year (once it’s 4 or more years old, in any 3 of the 5 years ending with this one), separate books, a contemporaneous time log, and no triple-net or personal-use property. Failing the safe harbor doesn’t rule out the deduction (rentals can still qualify as a trade or business under Section 162), but the safe harbor is the reliable path.

Above about $403,500 married filing jointly or $201,750 single (2026), the deduction starts to be limited by W-2 wages and , fully so $150,000 (married) or $75,000 (single) higher. The widened that range. If your rentals pay no W-2 wages, the limit can eliminate the deduction at high income.

If depreciation pushes net income below zero, there’s no positive QBI and no deduction. A rental with heavy depreciation can meet the safe harbor and still get nothing.

The election is annual. Attach a written statement to your return each year electing the safe harbor for the rental enterprise, signed under penalties of perjury. File Form 8995 (the simple form, below the threshold) or 8995-A (with the wage and property limits). The OBBBA (July 2025) made permanent, so there’s no scheduled end date.

Starting in 2026, the OBBBA guarantees a deduction of at least $400 if you have $1,000+ of QBI from active trades or businesses in which you materially participate. It rarely helps landlords: rentals run through a property manager or otherwise held passively don’t meet the material participation test, so this calculator doesn’t apply it.

See the full QBI guide for grouping properties into enterprises, the Section 162 trade-or-business path, and how cost segregation interacts with Section 199A. Tax law depends on your specific facts, so consult a CPA, especially above the income threshold.

Results are estimates based on your inputs and the assumptions on this page, not quotes or advice. A lender, servicer, or tax advisor will give you different numbers. Disclaimer

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Terms used on this page

The safe harbor and the income limits are written in the IRS terms below.

QBI (qualified business income): Net profit from a business, including rentals that count as a business. Section 199A lets you deduct up to 20% of it from federal taxable income.
Section 199A: The part of the tax code that creates the QBI deduction. The 2025 One Big Beautiful Bill Act made it permanent.
Safe harbor (Rev. Proc. 2019-38): IRS conditions that guarantee rentals count as a business for QBI: 250+ hours of rental services, separate books, a time log kept as you go, and no triple-net or personal-use property.
Rental real estate enterprise: One rental property or a group of them that you treat as a single unit for the safe harbor, so the 250 hours are counted across the group.
Triple-net lease: A lease where the tenant pays the property tax, insurance, and upkeep on top of rent. These properties can’t use the safe harbor.
Taxable income: Your income after the standard or itemized deduction. It decides whether the income limits apply and caps the QBI deduction at 20% of it.
W-2 wage and UBIA limit: Above the income threshold, the deduction is capped at the greater of 50% of W-2 wages the business pays, or 25% of those wages plus 2.5% of the buildings’ original cost (UBIA).
Depreciation: A yearly deduction for wear and tear on a rental building. It lowers rental profit, which can shrink or eliminate the QBI deduction.

Keep learning

Next steps

Rental tax shelter: see whether your rental shows a profit or a loss
Investment property: full returns on a rental
Cost segregation: faster depreciation, which can reduce QBI
REPS calculator: use rental losses against wages