Today TaxMama hears from Jean in Texas who asks. “How can I assure I meet the qualifications of a real estate professional. I am a landlord, not a real estate broker or agent.”
It’s actually quite simple. Read the IRS’s definition of a real estate professional:
Real estate professional. You qualified as a real estate professional for the tax year if you met both of the following requirements.
·More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated.
·You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated.
If you have a full-time job that is not in the real property trades or businesses, that means you work at least 2,000 hours in other professions. So unless you are also spending over 2,000 hours managing your property (or properties), you are not going to qualify.
If you do qualify, keep a log of your time spent working as a landlord and property owner.
Even though you probably don’t qualify as a real estate professional, you might well qualify to use up to $25,000 of the losses generated by the property because you are an active participant.
Read IRS Publication 925 Passive Activity and At-Risk Rules.
It will explain everything – and make your head spin.
And remember, you can find answers to all kinds of questions about real estate professionals and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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- IRS Publication 527 :: IRS’s definition of a real estate professional
- IRS Publication 925 :: Passive Activity and At-Risk Rules.