On September 24, 2019, the IRS issued Revenue Procedure 2019-38, setting a safe harbor for certain rental real-estate interests to count as a trade or business for the section 199A qualified business income deduction. The rule includes mixed-use property, but it does not make every landlord eligible. [shared-5331419724694f881c5178bfddf1c7850daaeb48f184d2f8bdf1a1a1b6cfa2e6]
Owners must keep separate books and records for each rental enterprise. For one operating less than four years, at least 250 hours of rental services must be performed each year. Older enterprises must meet that threshold in at least three of the previous five years. Taxpayers also need contemporaneous records of hours, services, dates and workers, then must attach a statement to the return for each year they rely on the safe harbor. [shared-5331419724694f881c5178bfddf1c7850daaeb48f184d2f8bdf1a1a1b6cfa2e6]
That paperwork may give qualifying owners a clearer route to claim the deduction, while adding recordkeeping work for owners and anyone performing services on their behalf. The standard also has a boundary: missing the safe-harbor tests does not automatically end the claim; the property may still qualify under the regulations’ general trade-or-business definition. The IRS release describes eligibility, not a guaranteed deduction or its value to any particular taxpayer. It is historical guidance and may not reflect current law. [shared-5331419724694f881c5178bfddf1c7850daaeb48f184d2f8bdf1a1a1b6cfa2e6]