Rental Pass-Through Deduction §199A Calculator
Rental real estate can qualify for the 20% Section 199A pass-through deduction IF it rises to the level of a Section 162 trade or business. The IRS Safe Harbor (Rev. Proc. 2019-38) requires 250+ hours of rental services annually plus separate books per enterprise. Above income thresholds, W-2 wages and Unadjusted Basis Immediately After Acquisition (UBIA) limits kick in.
IRS Safe Harbor Path
Rev. Proc. 2019-38 created a safe harbor: 250+ hours of rental services annually, separate books and records per rental enterprise, contemporaneous records of services after 2023. Rental services include maintenance, repairs, advertising, lease negotiation, tenant management, rent collection. Time spent by you OR your employees OR contractors counts. Travel and education time excluded.
Income Threshold Mechanics
Below threshold ($242K single / $484K MFJ for 2026): full 20% QBI deduction on rental QBI, no W-2/UBIA limit. In phase-out band ($75K range single / $100K MFJ): W-2/UBIA limit gradually applied. Fully above: deduction limited to greater of 50% W-2 wages paid OR 25% W-2 wages + 2.5% UBIA. Most landlords have no W-2 wages — UBIA component matters most.
Why Triple-Net Leases Don't Qualify
Section 199A regs exclude rental activities where tenant pays expenses and lessor has minimal active involvement. NNN, gross leases with no maintenance, and bare-land rentals typically fail the §162 trade-or-business test. Self-rentals (renting to your own §162 business) automatically qualify as trade-or-business. Short-term rentals (Airbnb) with substantial services usually qualify even without safe harbor.
Source: IRC §199A regulations, Rev. Proc. 2019-38 (safe harbor), 2026 IRS inflation adjustments. Last updated: May 2026.