Basic rental income question about 199a / QBI deduction

[Dustin Dadvit]

Okay.. I'm new but I've been reading a lot of posts.  It seems everyone is trying to get their involvement in their rental income business to be "actively Participating" so they can get the QBI deduction, but  I've also read that the QBI deduction applies to Passive rental income as well..  I'm probably borderline between active and passive.  So, I can become less active or more active in my rentals depending on which is more advantageous taxwise.  I don't think it matters but some rentals are held in SMLLCs , a few S -corps and some in my personal name. All disregarded entities per IRS

My rentals generate about $60k in net income a year after expenses and Deprecation.. In 2021 will increase to about $100,000 net profit.  I also generate about $50k per year from a construction business. 

My questions

1. If I am actively participating in my rental business does that mean I have to pay FICA / Self employment taxes of roughly 15% +/- on all my rental income? 

2.  Do I need to actively participate to qualify for the QBI 20% deduction for my rental income? Assuming I qualify under the other guidelines. 

3. I've also read posts that actively participating vs passive really only comes into play with deducting losses.. Since I never have losses it really wouldn't make much difference.

4. I sell about 1 property a year and have capital gains income.. this year it's about $100,000 in capital gains.. Does this get added to my $70k in rental income and $50k in earned income to put my over the $163k QBI threshold? or Does capital gains income not apply to the $163,300 single filer threshold?

5. Basically trying to figure out if my rental income can be treated as a trader/business for QBI / 199a  but not be subject to Self employment tax like my construction business income.

Thanks 

Dustin

[Christopher Smith]

1) Rental real estate property income that qualifies for QBI should not be subject to self employment tax. 

2) The standard to be met is the conduct of a trade or business under IRC 162, not the active or material participation rules. It sounds like you should meet the trade or business standard, and whether you meet or do not meet other standardd is not directly relevant.

3) I'm in close to the same situation as you are, no losses and meet the IRC 162 trade or business standard.

4) The limitation calculation is fact specific, my income is over the 199A limits, but I'm not ultimately limited (i.e., I still get the full 20%). You need to assess your own fact pattern.

5) It can.