§199A QBI Deduction
Do your rentals qualify for the 20% QBI deduction?
Separate books and records?
Income/expenses for the rental enterprise must be tracked separately from personal finances.
Contemporaneous time log?
Daily/weekly log of services performed (date, hours, who, what). Reconstructed after-the-fact logs lose in audits.
Excludes triple-net leases and personal-use property?
Safe harbor excludes triple-net leases (tenant pays all opex/tax/insurance) and property used personally >14 days/yr or >10% of rented days.
Filing status
Annual federal+state tax savings
$0/yr
You don’t currently qualify for the safe harbor. Most-fixable issues: tracking 250+ hours and starting a contemporaneous time log. With those in place, your $15,000 of positive net income would generate $960 of tax savings.
Safe harbor status
Does not qualify
Need contemporaneous log.
QBI base (positive net income)
$15,000
Net rental income (after depreciation)
Income vs phaseout threshold
Under (full deduction)
MFJ threshold: $394,000 → $494,000
QBI deduction
$0
Safe harbor not met
Annual tax savings
$0
at 32% combined marginal rate
The QBI rules in 5 sentences
1. The deduction: 20% of qualified business income, deducted from taxable income (not a credit, not a tax cut). For rentals, QBI = net rental income on Schedule E (after depreciation).
2. The safe harbor (Rev Proc 2019-38): 250+ hours of rental services per enterprise + separate books + contemporaneous log + excludes triple-net and personal-use property. Failing the safe harbor doesn’t kill the deduction (you can still meet §162 trade-or-business directly), but it’s the safe path.
3. The phaseout: above ~$394k MFJ / $197k single (2026 estimated), the deduction starts limited by W-2 wages and UBIA. Most small landlords pay no W-2 wages, so the phaseout effectively kills the deduction at high income.
4. Paper-loss rentals get zero benefit: if depreciation drives net income negative, no positive QBI = no deduction. Many high-depreciation rentals don’t benefit from §199A even though they qualify for the safe harbor.
5. 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 (simple, below threshold) or 8995-A (with W-2/UBIA limitations). §199A was made permanent by the One Big Beautiful Bill Act (July 2025); no scheduled sunset.
See full QBI guide for grouping enterprises, the §162 trade-or-business path, and cost-seg interaction with §199A. Tax law is fact-specific — consult a CPA, especially over the phaseout threshold.