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Why isn't Rental Real Estate income included in the Qualified Business Income (QBI) calculation?

Solution:

Updated 1/30/2019 - Page 50 of Publication 535 states; The ownership and rental of real property may constitute a trade or business. Notice 2019-07 provides a safe harbor under which rental real estate enterprise will be treated as a trade or business for purposes of the QBI deduction. For more information, on the safe harbor see Notice 2019-07. Rental real estate that does not meet the requirements of the safe harbor may still be treated as a trade or business for purposes of the QBI deduction if it is a section 162 trade or business.
In addition, 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 section 199A.

Based on these instructions, Schedule E rentals are not included as Qualified Business Income, unless the activity is marked as Land or Self-Rental.  However, Lacerte provides two ways to indicate Rental Real Estate income should be included in this calculation;

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