It’s that time of year again: tax time. If you own rental properties and use a property manager, you’ll receive a form 1099-MISC that reports your total rental income for the year. It’s important to accurately attribute this income to each property, especially if you plan to claim a Qualified Business Income (QBI) deduction.
When treating your properties as separate “trades” or “businesses,” each property’s income and loss are calculated separately for QBI deduction purposes. This means that attributing all rental income to just one property could result in excessive QBI, and hence too much QBI deduction. QBI can be claimed even with a standard deduction, so taking too much can cause issues.
If you treat all your properties as a single enterprise, it’s less of a concern because QBI is calculated by aggregating the income and expenses of all properties. However, it’s better to be cautious in case you change your mind later.
Unfortunately, TurboTax doesn’t currently allow you to attribute income from a single 1099-MISC to multiple properties in one go. To ensure accurate tax forms, you’ll need to split the income and enter a separate 1099-MISC for each property. To do this, use your whole-year income statement to find the total income for each property, then create a separate 1099-MISC as if your property manager generated one for each property. Be sure to confirm that the total of all manually-split 1099-MISC forms matches the aggregate one.
By following this workaround, TurboTax will produce accurate values for income on Schedule E and Form 8995-A, regardless of whether you choose to pass the “safe harbor test” or treat all rental property as a single “enterprise”. While it would be helpful if TurboTax allowed users to split income from 1099-MISC in its user interface, this method should help you achieve the right tax forms.