Discover how Real Estate Professional Status works
Real Estate Professional Status offers extensive tax benefits, allowing individuals engaged in real estate activities to treat their rental real estate activities as non-passive. This means losses from these activities can offset other types of income, potentially reducing overall tax liability.
To qualify, more than half of the personal services you perform in all trades or businesses during the tax year must be in real property trades or businesses in which you materially participate. Additionally, you must perform more than 750 hours of services during the tax year in these trades or businesses.
Required documents
To access Real Estate Professional Status, you will need to provide specific documentation, including:
- Time logs or calendars documenting hours spent on real estate activities
- Records of income and expenses related to real estate activities
- Documentation of material participation in real estate activities
- Tax returns and supporting schedules to validate your claims
Important considerations
Achieving Real Estate Professional Status requires meticulous documentation, particularly of your hours worked and your involvement in daily operations. It is crucial to ensure you meet both the 750-hour requirement and the material participation requirement.
Consulting with a tax professional is advisable to determine your eligibility and maximize the tax benefits accurately.
For more information, please refer to the IRS publication on Residential Rental Property.