Rental Income 20% Deduction Eligibility

New IRS Guidelines Released

 Tax Law

Published Monday, February 4, 2019

Tax Law Book Open to Title Page

The IRS has released guidelines on the new 20 percent business income deduction and other aspects of tax reform enacted at the end of 2017. Among other things, the guidelines set a safe harbor for applying the new deduction to your rental income.

If taxpayers’ rental activity reaches 250 hours a year, they can deduct their rental income under the safe harbor. If their activity is less than that, they can still try to deduct their rental income but the burden of proof is on them to show their activity is part of a trade or business.

The IRS has previously made clear that real estate commissions are eligible for the new deduction. The guidelines are summarized in the recent Voice for Real Estate video from NAR.