I listened to Wheelwright's podcast the other day discussing how short term rentals do not have the same rules as long-term rentals when it comes to some of the tax laws around active/passive investing. I'm going off the understanding that you still need to spend 500+ hours in the business to achieve material participation (please correct me if I'm wrong). I wanted to start tracking my daily hours in the business and wanted to understand HOW I need to do this so it gets approved come tax time. Any help or tips/tricks would be greatly appreciated.
Operating in an industry where "we track time," I can offer a few hopefully helpful tips:
1. Details matter: keep a log (something like an excel spreadsheet) that documents the date, duration, and events that occurred/work you did.
2. Keep your records contemporaneous: in other words, log your time entries as they occur. No "estimating" at the end of the week/month/year.
3. Consult your tax professional: while podcasts are great, make sure you have an existing relationship with a tax professional you can trust. And this means you're going to spend some money on that person. But find them, pay them well, and FOLLOW their advice.
I listened to Wheelwright's podcast the other day discussing how short term rentals do not have the same rules as long-term rentals when it comes to some of the tax laws around active/passive investing. I'm going off the understanding that you still need to spend 500+ hours in the business to achieve material participation (please correct me if I'm wrong). I wanted to start tracking my daily hours in the business and wanted to understand HOW I need to do this so it gets approved come tax time. Any help or tips/tricks would be greatly appreciated.
Thanks!
The rules are more complicated than your one sentence, and even Tom did not have the time to explain all of them on his podcast. 500 hours is one way to qualify for material participation, and there are other ways. Sorry, it is not simple.
Also, not just any "business-related" hours count. Hours spent watching podcasts and communicating on BP do not count. Here is an older thread discussing hours that do and do not count. https://www.biggerpockets.com/... The thread addresses a different topic, the Real Estate Professional status, but the same principle applies to the hours in both contexts.
Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
4y
I will not comment as to the tax laws and underlying rules - that is a discussion you can have with your tax advisor who presumably you are paying to help you.
What I will do is provide practical and business guidance on tracking time.
Firstly, there are apps available that can assist with time tracking where you can specifically detail your time, who you met with, etc. Secondly, calendar and email functions/apps on computers and smartphones provide great records and a log. Keeping contemporaneous records is critical.
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
1y
I've been recommending www.repstracker.com to my clients. Those that use it seem to like it and - as a CPA - I like the reports it produces. I'm able to review the reports provided and help my clients make the best choices depending on what they're doing.
I listened to Wheelwright's podcast the other day discussing how short term rentals do not have the same rules as long-term rentals when it comes to some of the tax laws around active/passive investing. I'm going off the understanding that you still need to spend 500+ hours in the business to achieve material participation (please correct me if I'm wrong). I wanted to start tracking my daily hours in the business and wanted to understand HOW I need to do this so it gets approved come tax time. Any help or tips/tricks would be greatly appreciated.
Thanks!
Hey Jake, we have a tracker that we give to a lot of our clients to track all of these times with examples. Feel free to send me a DM if you or anyone wants it.