QBI for Real Estate Professionals

Real estate professionals have unique tax considerations, and one powerful benefit is the Qualified Business Income (QBI) deduction. If you’re in the real estate business, understanding how QBI for real estate professionals works can help reduce your tax burden significantly.

At L&Y Tax Advisor, we specialize in helping real estate agents, brokers, and investors make the most of available deductions, including QBI.

What is QBI for Real Estate Professionals?

The QBI deduction, introduced by the Tax Cuts and Jobs Act (TCJA), allows eligible business owners to deduct up to 20% of their qualified business income. However, whether real estate professionals qualify can depend on how their business is structured and operated.

How to Qualify for QBI as a Real Estate Professional

To claim the QBI deduction, you must meet certain criteria:

  • Your income must come from a qualified trade or business including certain real estate activities.

  • You must be actively involved in the real estate business (material participation is key).

  • Rental real estate may qualify if it meets the IRS’s “safe harbor” requirements.

  • Your business should ideally be structured as a sole proprietorship, partnership, S orp, or LLC.

Key Considerations

At L&Y Tax Advisor, we advise clients on:

  • Entity structure: LLCs and S-Corps may offer better QBI advantages.

  • Record-keeping: Maintain detailed logs of hours worked and tasks performed.

  • Net income limits: QBI deductions may phase out for high earners.

  • Aggregation rules: Multiple properties can sometimes be treated as one business for QBI.

Benefits of QBI for Real Estate Professionals

  • Reduces taxable income.

  • Encourages smart business structuring.

  • Enhances investment profitability.

  • Helps independent agents compete with larger firms.

FAQs

Q: Does rental income qualify for QBI?
 A: Yes, if the rental activity qualifies as a business, especially under the IRS safe harbor rules.

Q: Can real estate agents claim QBI?
 A: Yes, if they’re self-employed and their income is from a qualified business.

Q: Does forming an LLC help?
 A: Often, yes. An LLC can simplify QBI eligibility and provide liability protection.

Q: Can I still qualify if I have a W-2 job?
 A: Only the income from your business qualifies for QBI, not your W-2 wages.

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