Do you qualify as RE PRO?

[Melanie Baldridge]

To qualify as an RE Pro you must:

1. Spend more than half of your total working hours in an RE business in which you materially participate.

2. You must work at least 750 hours per year in a qualified RE business.

So most people who have high-earning W-2 jobs outside of real estate won't qualify.

But the unique thing about RE pro status is that even if you don’t qualify but your spouse does, you can both file jointly and claim the losses from your RE investments to offset your other active income together.

It's an incredibly powerful benefit if you do meet the criteria.

[Johan Garcia]

Quote from @Marc Lock:

How is material participation defined?

Once a taxpayer meets the REP status, do they need to materially participate in each property?

The IRS uses material participation tests to determine if you are actively involved in an activity. There are 7 material participation tests and you only need to meet one. I'm not going to list them all but let me know and I can provide them. 

You can make an election under IRC Section 469(c)(7)(A) to treat all your rental real estate interests as a single activity -- an election to aggregate them all. So your material participation is assessed across all your rental properties collectively not one-by-one.