Safe Harbor Rules for Rental Properties to Qualify for a 20% Tax Deduction
Mike Sylvester • January 31, 2019
Beginning in 2018 most businesses will qualify for the new 20% deduction on Qualified Business Income. In order to qualify for this deduction, you must prove your activity rises to the level of a business. The IRS considers most rental property as an investment and not a business.
If it is a self-rental, meaning my LLC owns a building that rents to my S-Corporation, my rental LLC automatically qualify as a business and gets the deduction.
The IRS did establish a safe harbor where rental properties can qualify for this deduction. If you have a rental property or properties you have to do the following:
- Keep separate books and bank accounts for your rental property
- Spend at least 250 hours every year working on the property (that is almost 5 hours per week!)
- Issue 1099 forms if you paid an individual more than $600
Interestingly enough if you have a triple-net lease, you automatically do not qualify for this deduction regardless if you meet the above safe harbor rules.
In order to take advantage of the safe harbor rules, you also must keep a contemporaneous log of the time you, your agent, or your independent contractors spent on your rental property to prove you spent at least 250 hours.
Time you spend in an investor capacity such as reviewing financial statements, obtaining financing or refinancing the property, buying the property and traveling to and from the property do not count toward your 250 hours.
The IRS just released additional rules and regulations on how to take this 20% business deduction and I am sure we will see even more come out in the next couple of months. SBS CPA Group is doing our best to keep on top of these changes and clarifications as they come out so we can properly take or not take this deduction for you, so stay tuned!
Karena Sylvester, CPA
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Affordable Care Act Refunds Did you get an unexpected treat this month? If you bought your healthcare through the Health Insurance Marketplace in 2026, you may be eligible for a $500 Affordable Care Act (ACA) refund. Checks and direct deposits were sent out starting in late September and will continue arriving in homes through November. Who is receiving the refunds? All refunds are going to people who live in one of the thirty states that use the federal marketplace (HealthCare.gov) rather than state marketplaces. Indiana is one of the qualifying states. About one million Americans who did not receive any premium assistance or subsidies in 2026 were deemed to have overpaid for their insurance coverage. The refunds are being sent out automatically to those who qualify. They will be sent for each person, so if you qualify and have other members of your household on your insurance coverage that qualify, they too will get a refund. How will you receive your refund? Refunds began being released in late September and will continue to arrive through early November. If you have your bank information on file with the exchange, you may receive a direct deposit. Otherwise, it will come as a check through the mail. Check your mail So, check that pile of junk mail for a letter from the US Treasury Department if you think you qualify. If you have not received a letter, and you think you qualify, check your bank transactions for a $500 deposit from the Treasury. If you do not receive a payment by late November, check to make sure all your information was up to date on HealthCare.gov. If all of that information is correct, you can contact the US Treasury Department to report a missing payment.
Business Meals in 2026: What Can You Deduct? Business meals can be a useful tax deduction, but there are a few rules to keep in mind. For 2026, the general rule is that 50% of a qualifying business meal is deductible. So, if you spend $100 taking a client to lunch, you would generally deduct $50. So, what qualifies? The meal needs to have a legitimate business purpose. This could be lunch with a client, a meeting with a prospective customer, or a meal while traveling for business. Your everyday lunch by yourself doesn't qualify just because you're working while you eat. The meal also can't be considered lavish or extravagant under the circumstances. What about entertainment? Entertainment expenses are generally not deductible. However, food and drinks purchased separately from the entertainment may still qualify for the 50% meal deduction. For example, if you take a client to a baseball game, the tickets generally aren't deductible, but separately purchased food may be. Don't forget your records Keep the receipt, but also make a quick note about who you were with and the business purpose. Something as simple as “Lunch with ABC Company to discuss new contract” can make things much easier when it's time to prepare your tax return. Employee meals and company events can have different rules, so those expenses may need a closer look. The bottom line: 50% is the general rule, but not every meal is deductible. When in doubt, keep the receipt and let your tax professional determine how it should be treated. For more information about IRS record keeping visit: https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping
Do You Have Money Waiting for You? Do you like money? In a world where it seems everyone wants to take more and more of your money, there is one place that is doing the opposite: IndianaUnclaimed.gov . IndianaUnclaimed.gov is a government-run website designed to connect you with money or property that was either forgotten about-or that you may never have known was supposed to be yours in the first place. This year alone, over $85 million in money and property has been returned to its rightful owners. Best of all, filing a claim is free. To see if you have any missing funds available, visit IndianaUnclaimed.gov and click on the gold “Claim Yours” box. Enter your name to see if any unclaimed property is listed for you. Be sure to search for all variations of your name, including maiden names or former names. If you find something that belongs to you, you can submit a claim online. You will receive an email asking you to provide documentation proving that you really are the person entitled to the property. This can get a little complicated if you have moved or changed your name since the property became unclaimed. You will need to provide documentation connecting you to your former name or address. The email you receive will tell you specifically what documents are needed. If you cannot find the documents, provide them with a copy of your social security card. They can use it to try to verify former names and addresses. Don’t skip the search just because you no longer live in Indiana! If you lived in Indiana when the property became unclaimed, you will be listed on the website, and you can still claim your money. You can also search for friends and family members, too. If you find property belonging to someone you know, you can request the website send them an email alerting them that they may have unclaimed property waiting for them. You can also search for deceased family members. Their property is not lost. An heir or other person legally entitled to the deceased owner’s property is still able to file a claim. Don’t leave money on the table! Check IndianaUnclaimed.com today. If you have any questions, Indiana’s Unclaimed Property Division can be reached at 1-866-462-5246.
Clear the Books: Indiana Announces 2026 Tax Amnesty Program If you are completely caught up on your Indiana tax payments and filings, you can safely disregard this notice. This program only applies to individuals and businesses with outstanding state liabilities or unfiled returns for tax periods ending prior to January 1, 2024 . Note: This is an Indiana state tax initiative only . It provides zero relief for federal IRS taxes, local property taxes, or state unemployment taxes. What You Need to Know From July 15 through September 9, 2026 , the Indiana Department of Revenue (DOR) is hosting Tax Amnesty 2026 . By settling your base state tax liability, the state will waive 100% of all penalties, interest, and collection fees . Scope & Exclusions: Covers state-administered taxes (Income, Sales, Withholding) ending before January 1, 2024. Anyone who utilized Indiana's 2005 or 2015 amnesty programs is disqualified. Filing Requirement: Your filing history must be current to qualify. Behind on prior-year returns? Call our office immediately to get caught up before the window closes. Notifications: The state only sends official notices via standard physical mail . If you have unfiled tax years, you will not receive a letter because your balance cannot be calculated yet. Check Your Status Use the state's public look-up tool to instantly check if your account is flagged. Watch our 2-minute Loom video to see exactly how: [➡️ WATCH VIDEO WALKTHROUGH HERE] Our firm can file your back-taxes electronically for the fastest processing. Mailing Paper Returns? Do not use the address printed on the form. For correct amnesty routing, mail returns to: P.O. Box 28, Indianapolis, IN 46206-0028 . Deadlines & Payment Options Lump Sum: Process your full payment before September 9, 2026 . Payment Plans: For eligible debts over $100 (individuals) or $500 (businesses), you must establish a plan by September 9, and pay the balance in full by June 7, 2027 . Warning: Defaulting on a payment plan retroactively reinstates all original penalties and interest. If your account shows an active flag, contact us today so we can secure your savings.
Juneteenth is June 19th and our office will be closed in observance of the federal holiday.
Income tax season is almost here! 2026 will be an amazing year at SBS CPA Group! If you have signed up for TaxDome we will send you an electronic tax planner on January 20th, 2026. This is the last year TaxDome/Online clients will be mailed a tax planner. If you do NOT have your tax planner by the end of the day January 23rd, 2026, please call Nikkie Reyes at 260-407-5000 or email her at Admin@sbscpagroup.com. Normally we mail you 6 pages; this year it is 10 pages due to all of the new tax laws and the complications the new laws bring. One nice feature of the TaxDome planner is as you answer questions, it hides irrelevant questions saving you time. We prefer everyone use TaxDome since it secure, efficient, and saves you trips back and forth to our office. The regular mail in our area has been just awful with mail lost and frequent delays. If you are not setup to use TaxDome, please call Nikkie Reyes at 260-407-5000 and she will ensure everything is setup. You are either a PAPER client or an online/TaxDome client for your income tax preparation, you CANNOT be both. It is EXTEMELY IMPORTANT that you do ONE of the following when you give us everything for your income tax preparation: Paper clients: You fill out the paper tax organizer completely and please wait until you have every single document we need to prepare your income tax returns before you give us any documents! Please do NOT drop anything off until you have everything we need. We must have it all at once; additional fees will be charged to anyone who does not follow this important rule. OR Online/TaxDome clients : You shred the paper tax planner we sent you and do not fill it out, please do not upload it to us as a pdf, etc. Instead, you start the process by filling out the online/TaxDome tax planner we send you via TaxDome on January 20th, 2026. You can upload source documents to TaxDome anytime; however, we prefer you upload them all at once immediately after you fill out the online/TaxDome tax planner. There will be a task you have in TaxDome to tell us that all of your documents are uploaded after you complete the organizer. We will not start your returns until you mark that task complete. For online/TaxDome clients there will be additional fees charged if you give us more documents after telling us we have everything. For all clients, we have always asked you to drop everything off at once; however, this last tax season most of our clients did not do this and it added several hundred hours to preparation time and all of this time will be charged to you moving forward. We cannot be efficient unless you give us everything at once. Please remember for income tax preparation, you are either a paper client or an online/TaxDome client and cannot be both. We look forward to another great tax season handling our clients' income tax returns efficiently and accurately!
SBS CPA Group is hiring! Best Tax Manager position in Fort Wayne, Indiana. We are looking for an amazing Tax Manager! We are looking for our next rockstar employee! We have a lot to offer, and we want to hear from you quickly! We are looking for a CPA with five or more years of experience. The right person could quickly become a partner. The main item that sets us apart from other CPA firms is how few hours per year each of us works. We have an amazing work life balance, our employees work (NOT bill) 1904 hours per year. Note this includes training, CPE, etc. We have an extremely flexible work schedule and our employees all have either Mondays or Fridays off the last 37 weeks of the year. In fact, our employees work (NOT bill) an average of 27 hours per week for the last 37 weeks of the year. We do NOT have a second busy season. We pay overtime for all hours worked over 40 hours in a week to ensure no one is taken advantage of. We will encourage applicants to talk to all of our employees, our employees can verify the hours they work, the number of three-day weekends they take, and the fact that we do not have a second tax season. Our firm is very different than a typical CPA firm and we are proud of that fact. You can work a hybrid schedule with some days in the office and some days at home once training is completed. We have amazing benefits. You must be a CPA with experience in Public Accounting. Experience preparing individual and corporate income taxes is a must as is experience reviewing those returns. If you are tired of working crazy hours, please reach out to us today! Please reach out to Mike Sylvester at Mike@SBSCPAGroup.com with your resume! Mike Sylvester, CPA
SBS CPA Group is hiring and looking for a great Senior Staff Accountant! Our full-time employees work 1904 hours per year. Our employees work significantly less than is typical at public accounting firms. We allow a hybrid work schedule after initial training is complete. Our pay is in the top 25%; our benefits are in the top 25%. We are looking to hire someone with a four-year degree who is a CPA or CPA eligible. The more experience the better! Experience preparing a wide variety of income tax returns is a must. The ability to use technology is a must. Please reach out to Mike Sylvester at Mike@SBSCPAGroup.com with your resume! Mike Sylvester, CPA
Nathan Skinner, one of our four Senior Staff Accountants, is moving back home to Dayton, Ohio. Nathan has been with us for four years since he graduated college in 2021. We wish Nathan success in all of his future endeavors, and we will miss him greatly! His entire family is in Dayton, and we think this move will be great for his family. Nathan's last day at SBS will be either September 18 th or 19 th . If you normally work with Nathan, you will get an email from us letting you know who you will be working with moving forward! If you need something before you get the email; please call Nikkie Reyes at 260-407-5000 and she will connect you to the right person! SBS CPA Group is hiring, and we will be posting our job opening on Indeed and on our company blog in the next few days. If you know someone looking for a great job in public accounting in Fort Wayne, Indiana, please reach out to Mike Sylvester at Mike@sbscpagroup.com!
The gambling rules for tax year 2026 have changed due to the new tax bill. One Big Beautiful Bill Act (OBBB), was signed into law on July 4, 2025 by President Trump. These changes will affect both casual gamblers and professionals beginning in the 2026 tax year. Those who gamble should understand the new rules. The Old Rule (Through 2025) Historically, the IRS has allowed taxpayers to deduct gambling losses—but only to the extent of their gambling winnings. If you won $10,000 but lost $15,000, you could deduct $10,000 in losses, effectively zeroing out your taxable gambling income. The New Rule (Starting 2026) Beginning with the 2026 tax year, gambling losses will be deductible at only 90% of the amount of winnings. While this may sound like a minor adjustment, the impact is significant. Example: You win $100,000 and lose $100,000 during the year. Under the old rule: You would report $100,000 of income and deduct $100,000 of losses, resulting in zero taxable gambling income. Under the new rule: You can deduct only $90,000 of those losses on your federal income tax returns. That means you’ll still be taxed on $10,000 of “phantom income,” even though you truly broke even. This rule applies to all gamblers, whether you buy the occasional lottery ticket or operate as a professional gambler. How Itemized Deductions Work It’s important to understand that gambling losses are deductible only if you itemize deductions on your tax return. Here’s what that means: Standard vs. Itemized Deduction Every taxpayer can take the standard deduction—a fixed amount based on filing status. For 2025, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Alternatively, you can choose to itemize deductions if the total of your eligible deductions (mortgage interest, charitable contributions, state and local taxes, medical expenses, and gambling losses, among others) is higher than the standard deduction. Where Gambling Losses Appear Gambling losses are reported on Schedule A, Itemized Deductions, not directly against gambling winnings. You must report all gambling winnings in full as income. Losses are deducted separately on Schedule A, up to the allowable limit (100% through 2025, 90% starting in 2026). Recordkeeping Requirements To claim these deductions, you must keep meticulous records—receipts, tickets, player’s club statements, and a diary of gambling activity. Without proper documentation, the IRS may disallow your deduction even if you had genuine losses. Why It Matters The IRS projects that this change will raise more than $1 billion in revenue over the next decade, but it comes at the expense of fairness. Many taxpayers will now find themselves paying tax on income they never actually earned. Professional gamblers, in particular, may feel the heaviest impact, as their livelihoods often involve large swings of wins and losses. Additionally, because gambling losses are only deductible for those who itemize, some taxpayers may find that the standard deduction provides a bigger benefit—even if it means their gambling losses go unused. This makes strategic planning even more important. Planning Ahead For 2025, the old rules remain in effect. If gambling is part of your financial life, I strongly recommend: Evaluating whether itemizing makes sense in your situation. Keeping meticulous records of all winnings and losses. Budgeting for higher tax liability in 2026 and beyond, even if you expect to break even. Consulting with a tax professional to explore potential strategies for minimizing the impact. At SBS CPA Group, we’re here to help clients navigate these changes with confidence. If you’d like to review your individual situation and discuss strategies for 2025 and beyond, please reach out to your CPA and we’d be glad to assist. Mike Sylvester, CPA
