What activities actually matter for real estate professional status? (REPS)

[Account Closed]

Material Participation Activities:

Property Maintenance: Engage in repairs or construction work on the property to maintain or enhance its condition.

Contractor Management: Oversee the hiring and coordination of contractors or handymen for property-related tasks.

Tenant Interaction: Communicate with tenants regarding lease agreements, inquiries, or property issues.

Property Acquisition: Invest time in property search and evaluation processes, including visits to potential investment properties.

Property Management Tasks: Perform activities typically handled by property management companies, such as rent collection or property inspections.

Non-Qualifying Activities:

Educational Pursuits: Time spent on real estate education or training programs does not count towards material participation.

Investor Hours: Hours dedicated to investment analysis, financial planning, or portfolio management are not considered material participation. Unless paired with the above, these are usually thrown out in tax court. 

Unsuccessful Property Search: Hours spent on unsuccessful property searches, where no purchase is made, do not qualify.

On-Call Periods: Instances where you are on-call but do not actively perform work do not count towards material participation.

Meeting Requirements:

Maintain Detailed Records: Keep accurate time logs and records documenting your involvement in material participation activities, supported by evidence such as emails and calendar appointments.

Seek Professional Guidance: Collaborate with a qualified tax professional to ensure compliance with IRS regulations and to optimize your material participation strategy.

I hope this high-level overview gives you insight into what activities matter and ones that do not. A good rule of thumb I like to tell clients is that if your activities are integral and income producing, where as if you were not to do the activitiy it would result in the property's financial health being worse off, it should count in general. 

[Jason Watson]

Also, here is our firm's Real Estate Professional webpage... hasn't been updated in a few years. But it has each of the 7 material participation tests plus verbiage from the ATG. DM me your commentary or suggested edits.