Rental Activity and Self-Employment Tax

Recent Cases with Online Rental Marketplaces

Robert S. Barnett, , JD, MST, CPA

Tax planning for real estate activities often involves a myriad of tax considerations. For example, if the real estate produces a loss, a determination must be made whether the loss is limited by insufficient basis or by the at-risk or passive activity loss rules which arise under IRC sections 465 and 469. When income is generated, other questions arise, including whether such income will qualify for the IRC section 199A deduction introduced by the Tax Cuts and Jobs Act (TCJA) of 2017, whether the income may be subject to the net investment income tax surcharge of 3.8% under IRC section 1411, and whether the rental income will be subject to self-employment tax. This article discusses the intersection of rental real estate and the self-employment tax.