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Qualified Trade or Business - QBI

We need to identify what qualifies as a trade or business under §199A and as defined under §162.  The taxpayer must be engaged in trade or business for the primary purpose of producing income or profit.  The taxpayer must also be involved with the business on a regular and continual basis.  If the taxpayer owns an interest in a pass-through entity, the trade or business determination is made at that entity's level.



Qualified trades or businesses include §162 trades or businesses except:

  • Trades or businesses conducted through a corporation

  •  W-2 wages earned as an employee (Note: statutory employees may qualify as an independent contractor)

  • Specified service trades or businesses (SSTB)


Ownership and rental of real property may constitute a trade or business. Notice 2019-07 provides safe harbor rules used to determine if rental real estate will be treated as a trade or business for purposes of the QBI deduction.  Rental real estate that does not qualify under the safe harbor rules (https://www.bradyware.com/qbi-deduction-safe-harbor-rule-for-rental-real-estate/) may still be treated as a trade or business for purposes of the QBI deduction if it meets the definition of a trade or business under §162.


The rental or licensing of property to a commonly controlled trade or business operated by an individual or a pass-through entity is considered a trade or business under §199A.

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Cathy Fisher

Common Cents Bookkeeping and Tax Preparation

Serving Henderson, NC, Buncombe County, Polk County, Transylvania County

E: cathy@commoncentsqbo.com

P: 828-595-2835

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