REPS status as Photographer

[Tatiana Viviano]

Last September while going through a transition to more passive real estate I started doing real estate photography for a photography company 1099. We became very busy this year and I started making great connections with alot of agents, builders and flippers. I get to see houses before they are listed and saw an opportunity to bird dog a bit as my money is out on the streets for a build in FL currently. I also refer some of my contractors for repairs.

I began sending info to flippers for upcoming rehabs as well as my general observations on repairs. I began networking a bit more and began building my own client base. Many of the houses I visit between the Jersey Shore and Philadelphia have STR potential and I spent some time with agents familiar in it going through numbers etc.

I spoke with my tax strategist and he told me so long as I meet 750 hours of shooting properties and meeting with agents or owners I actually qualify for real estate professional status! I was blown away! I am providing a service in "real property" for Aquistions, rentals, redevelopment and management as stated by the IRS for qualifications. Conversion maybe as well? I can then offset my husbands W2 Income as well as my own. We entered a higher bracket this year so this would be tremendously helpful. I also checked with another accountant and he agreed it can be obtained.

!! NOTE!! I will have to make public notice that I am doing business as a sole proprietorship under, " __<whathaveyou>__ Real Estate Services"  and   I will of course have to keep detailed log books and be sure to log the time driving from my home office to each property I shoot, but looking at my year average looks like I could definitely hit 750 hrs. between January and December this year.

Has anyone found themselves reaching REPS status doing other services for real estate instead of "in" real estate? As 1099?

I welcome any advice as I want to do this correctly. Part of me wanted to throw in a small quick flip this year to seal the deal. But I am very busy now and don't want to have to do that if I don't have to.

[Alan Asriants]

This is awesome! THe REPS will give you a lot of benefits, especially if you own real estate! 

Love that you got the opportunity to make connections and see these deals first! This is an awesome opportunity for you to find some deals yourself and possibly negotiate them before they hit the market!

I would love to have that info for multi families in my area

[Chris McCormack]

The law states real property trade or business means any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing or brokerage trade or business.

I'm not sure where the shooting of properties falls into this (maybe conversion?) - it seems like a bold move on your strategist's part but I'd be interested to see what other professionals have to say.

You mention the desire to throw in a quick flip. Each activity is treated as it's own under the law so you're going to want to coordinate with your tax planner to make sure you make the proper elections to bundle them together if possible. 

Also know that real estate flipping is automatically active and treated as ordinary business income (unless proper defense is made) - subject to self-employment tax.

[Tatiana Viviano]

So another part of this is that I own an LLC that does short term real estate, long-term real estate and flips. None of which I have right now. I only possess land with a permit on it currently. But it is all formed and ready. I've had that for about a year as I have tried to build out in Florida, which unfortunately doesn't look like it's gonna happen with the new lending parameters. my tax strategist is recommending that my real estate services sole proprietorship work alongside of it. In other words, contracting services from me/the source of proprietorship

[Matt Devincenzo]

One small, but very significant choice in your words above that I want to clarify. You said:

I can then offset my husbands W2 Income as well as my own.

Do you also have a W2 working for someone, or were you just referring to your own 1099 income? Because the other aspect of REPS is you must spend more time than any other trade or business, which with a full time W2 would be functionally impossible.  

[Lane Kawaoka]

I would not do this although I'm sure you can find a lot of CPA and registered agents to check that REP box for you. The main issue here is that it's important to have active participation in your real estate portfolio, rather than just any kind of involvement in real estate. So, unless you're actively involved in managing and growing your rental properties (even if its snapping photos), it's unlikely to qualify for the benefits mentioned. Even if you were taking photos of your properties, it would be hard to justify spending so many hours on that alone.

To put it simply, your involvement should be directly tied to your rental property portfolio in order for this strategy to work. It's about actively participating in the management. Another common one is being an LP in a bunch of syndication... that does not count either.

[Basit Siddiqi]

unless you have some rentals by the end of the year, I am not sure how having REPS status will help you in 2023.

A Flip by the end of the year(normally considered active income) will not decrease your taxable income unless you operate at a loss(which you likely don't want to.

[Russell Brazil]

Youre tax strategist is wrong. As @Chris McCormack listed, there are very specific trades that qualify for REPS, and photography is not one of them.

[Michael Plaks]

@Tatiana Viviano

Unless we're missing some pieces in the whole picture of your businesses, I doubt that your tax strategist is helping you.

1. As @Basit Siddiqi pointed out, REPS will only help you if you place your rentals in service this year.

2. And I should add, if they are LTRs. STRs have their own rules that are not linked to REPS.

3. I concur with @Chris McCormack and @Russell Brazil: your hours working as a real estate photographer cannot count towards the 750 hrs requirement for REPS.

[Chris Picciurro]

I also concur with the tax pros on this thread. I don't see how photography will count towards to 750 hour rule. That said, there are a lot of other tax strategies out there that might be a benefit.

[Tatiana Viviano]

Quote from @Michael Plaks:

@Tatiana Viviano

Unless we're missing some pieces in the whole picture of your businesses, I doubt that your tax strategist is helping you.

1. As @Basit Siddiqi pointed out, REPS will only help you if you place your rentals in service this year.

2. And I should add, if they are LTRs. STRs have their own rules that are not linked to REPS.

3. I concur with @Chris McCormack and @Russell Brazil: your hours working as a real estate photographer cannot count towards the 750 hrs requirement for REPS.

So I had consider doing long-term rentals this year however, I don’t think that will help me with reps status. I don’t think I can matriculate 750 hours on a rental property between now and December. Do you have any other recommendations?

So I would consider doing long-term rentals this year however, I don’t think that will help me with reps status. I don’t think I can matriculate 750 hours on a rental property between now and December. Do you have any other recommendations?

And are you sure That meeting up with the different agents homeowners and flippers when I go there to shoot does not count towards my 750 hours? I was told that I don’t necessarily have to own property in order to be considered reps status. I was told that I could be rendering services for others in real estate as long as they were in acquisitions, construction, etc. In other words providing a service? Is this not correct? I have heard that it is sort of a gray area and I tend to stay away from the gray areas of tax law. 

[Tatiana Viviano]

Quote from @Matt Devincenzo:

One small, but very significant choice in your words above that I want to clarify. You said:

I can then offset my husbands W2 Income as well as my own.

Do you also have a W2 working for someone, or were you just referring to your own 1099 income? Because the other aspect of REPS is you must spend more time than any other trade or business, which with a full time W2 would be functionally impossible.  

I am 1099 only. 

[Tatiana Viviano]

Quote from @Chris Picciurro:

I also concur with the tax pros on this thread. I don't see how photography will count towards to 750 hour rule. That said, there are a lot of other tax strategies out there that might be a benefit.

What do you feel would be a good tax advantageous move when I receive the money off the streets from previous investment. Should be about a month from now, so I have to be in December to start making moves. Should I just go STR with the current LLC I have? Simplest course of action? Or is there another way to spin this so that I can offset my husband's W-2 income and my 1099?

[Michael Plaks]

Quote from @Tatiana Viviano:

Quote from @Michael Plaks:

@Tatiana Viviano

Unless we're missing some pieces in the whole picture of your businesses, I doubt that your tax strategist is helping you.

1. As @Basit Siddiqi pointed out, REPS will only help you if you place your rentals in service this year.

2. And I should add, if they are LTRs. STRs have their own rules that are not linked to REPS.

3. I concur with @Chris McCormack and @Russell Brazil: your hours working as a real estate photographer cannot count towards the 750 hrs requirement for REPS.

So I would consider doing long-term rentals this year however, I don’t think that will help me with reps status. I don’t think I can matriculate 750 hours on a rental property between now and December. Do you have any other recommendations?

And are you sure That meeting up with the different agents homeowners and flippers when I go there to shoot does not count towards my 750 hours? I was told that I don’t necessarily have to own property in order to be considered reps status. I was told that I could be rendering services for others in real estate as long as they were in acquisitions, construction, etc. In other words providing a service? Is this not correct? I have heard that it is sort of a gray area and I tend to stay away from the gray areas of tax law. 

I did not "recommend" LTRs. I simply mentioned that REPS is only applicable to LTRs. STRs have different rules.

And you cannot provide services to REI people, you need to be an REI person yourself. I work only with real estate investors, but my hours do not qualify, either.

[Tatiana Viviano]

Quote from @Michael Plaks:

Quote from @Tatiana Viviano:

Quote from @Michael Plaks:

@Tatiana Viviano

Unless we're missing some pieces in the whole picture of your businesses, I doubt that your tax strategist is helping you.

1. As @Basit Siddiqi pointed out, REPS will only help you if you place your rentals in service this year.

2. And I should add, if they are LTRs. STRs have their own rules that are not linked to REPS.

3. I concur with @Chris McCormack and @Russell Brazil: your hours working as a real estate photographer cannot count towards the 750 hrs requirement for REPS.

So I would consider doing long-term rentals this year however, I don’t think that will help me with reps status. I don’t think I can matriculate 750 hours on a rental property between now and December. Do you have any other recommendations?

And are you sure That meeting up with the different agents homeowners and flippers when I go there to shoot does not count towards my 750 hours? I was told that I don’t necessarily have to own property in order to be considered reps status. I was told that I could be rendering services for others in real estate as long as they were in acquisitions, construction, etc. In other words providing a service? Is this not correct? I have heard that it is sort of a gray area and I tend to stay away from the gray areas of tax law. 

I did not "recommend" LTRs. I simply mentioned that REPS is only applicable to LTRs. STRs have different rules.

And you cannot provide services to REI people, you need to be an REI person yourself. I work only with real estate investors, but my hours do not qualify, either.

Ok I see. And Yes I do understand about the different rules with STR vs. LTR.

I have a Meet with my tax strategist tonight to discuss all this. Either I completely misunderstood him from the get go or he doesn't understand REPS it sounds like.

[Tatiana Viviano]

Update! I spoke with my tax strategist after reading all of these and realized I had the setup completely wrong. We went back through my RE LLC activities and he showed me where my material participation actually is. It isn't in the photography at all but all the other activity I do with my LLC at the properties and in the real estate I currently own I just hadn't seperated them out. Going through backlogs I do qualify. Thank god I kept good records with Life Cycle app and mileage app. It shows boots on ground proof of all my activity and "material Participation"

[Eric Williams]

Part of me wants to think she has a case.

Basically all those separate real estate activities can be considered separately or alone.

Considered as one trade or business (an aggregate of activities), she may have material participation, at which point her personal services related would count.

(d) General rule for determining real property trades or businesses—(1) Facts and circumstances. The determination of a taxpayer's real property trades or businesses for purposes of paragraph (c) of this section is based on all of the relevant facts and circumstances. A taxpayer may use any reasonable method of applying the facts and circumstances in determining the real property trades or businesses in which the taxpayer provides personal services. Depending on the facts and circumstances, a real property trade or business consists either of one or more than one trade or business specifically described in section 469(c)(7)(C). A taxpayer's grouping of activities under § 1.469–4 does not control the determination of the taxpayer's real property trades or businesses under this paragraph (d).

(c) Requirements for qualifying taxpayers—(1) In general. A qualifying taxpayer must meet the requirements of section 469(c)(7)(B).

(3) Requirement of material participation in the real property trades or businesses. A taxpayer must materially participate in a real property trade or business in order for the personal services provided by the taxpayer in that real property trade or business to count towards meeting the requirements of paragraph (c)(1) of this section.

[Eric Williams]

Quote from @Eric Williams:

Part of me wants to think she has a case.

Basically all those separate real estate activities can be considered separately or alone.

Considered as one trade or business (an aggregate of activities), she may have material participation, at which point her personal services related would count.

(d) General rule for determining real property trades or businesses—(1) Facts and circumstances. The determination of a taxpayer's real property trades or businesses for purposes of paragraph (c) of this section is based on all of the relevant facts and circumstances. A taxpayer may use any reasonable method of applying the facts and circumstances in determining the real property trades or businesses in which the taxpayer provides personal services. Depending on the facts and circumstances, a real property trade or business consists either of one or more than one trade or business specifically described in section 469(c)(7)(C). A taxpayer's grouping of activities under § 1.469–4 does not control the determination of the taxpayer's real property trades or businesses under this paragraph (d).

(c) Requirements for qualifying taxpayers—(1) In general. A qualifying taxpayer must meet the requirements of section 469(c)(7)(B).

(3) Requirement of material participation in the real property trades or businesses. A taxpayer must materially participate in a real property trade or business in order for the personal services provided by the taxpayer in that real property trade or business to count towards meeting the requirements of paragraph (c)(1) of this section.

 (4) Personal services. Personal services means any work performed by an individual in connection with a trade or business. However, personal services do not include any work performed by an individual in the individual's capacity as an investor as described in § 1.469–5T(f)(2)(ii).