Long-term rental |
Passive by default; losses often suspended unless the $ 25,000 active participation allowance or REP + material participation applies. |
Often qualifies, if it rises to a Section 162 trade / business or you meet the rental safe harbor( separate books + 250 hours + contemporaneous records). |
Qualifies, if above NIIT thresholds, unless it’ s a Section 162 trade / business and nonpassive to you( NIIT exclusion may apply). |
Don’ t confuse QBI safe harbor hours with material participation. REP helps for Section 469; NIIT still needs Section 162 + nonpassive analysis. |
Short-term rental: Average stay ≤ 7 days or ≤ 30 days with significant services |
May NOT be treated as a“ rental activity.” Then it’ s analyzed like an operating business and material participation becomes the main pivot. |
Often qualifies, if run at a business level( frequently Section 162). The rental safe harbor is optional and applies only to Section 199A. |
May qualify, if Section 162 trade / business and you materially participate( nonpassive). NIIT often doesn’ t apply to that income; otherwise NIIT can apply. |
The levers are( 1) whether you meet the short-term rental exception,( 2) it rises to a Section 162 trade / business and( 3) material participation. |
Self-rental( rent property to your own business you materially participate in) |
Net rental income may be recharacterized as nonpassive under selfrental rules. |
Often qualifies, but the rental safe harbor generally excludes commonly controlled / self-rentals. Regulations may still treat it as a trade / business in some cases. |
Often excluded from NIIT, if treated as derived in the ordinary course of a Section 162 trade / business and nonpassive( including certain grouped / self-rental situations). |
Be careful with grouping and documentation. Income recharacterization can surprise taxpayers who expected“ passive” rental income. |
Mixed-use / vacation home with personal use( Section 280A“ residence” rules) |
Often passive for the rental portion. Expenses may be limited by Section 280A ordering rules when treated as a residence. |
The rental safe harbor does not apply if the property is used as a residence. QBI may still be possible under facts, but safe harbor is off the table. |
Often qualifies on taxable rental net income, if above thresholds unless Section 162 + nonpassive exclusion applies. |
Track personal-use days carefully. Personal use can turn a“ rental” into a“ residence” for Section 280A purposes. |
Rent your home fewer than 15 days( the“ 14-day rule”) |
Generally, not reported as
rental activity.
|
Does not qualify( income
typically not reported).
|
Does not qualify( income
typically not reported).
|
If you meet the < 15-day rule, you generally don’ t report the rent, and you generally can’ t deduct rental expenses. |
Triple-net lease( TNN) |
Often passive. Owner
involvement is typically
limited.
|
The rental safe harbor excludes property leased under a triple-net lease. QBI may still be possible under facts, but safe harbor is off the table. |
Often qualifies, if above thresholds, unless it clearly rises to Section 162 + nonpassive( less common in classic TNN). |
TNN often looks“ investment-like,” which can affect both Section 199A( safe harbor) and NIIT analysis. |