8580 / What is a qualified trade or business for purposes of the Section 199A deduction for qualified business income (QBI)?

The proposed regulations limit qualified trades or businesses for purposes of the Section 199A deduction to trades or businesses that rise to the level of Section 162 trades or businesses. This definition excludes the trade or business of being an employee. To qualify as a trade or business under Section 162, the activity must be regular and continuous, and be carried on with a primary motive of generating income or profit. This definition would generally exclude rental real estate activities unless the individual can show that Section 162 is satisfied (generally via a facts and circumstances analysis of the business owner’s level of participation in the activity). See Q 8581 for information about the IRS rules for rental real estate businesses.