Are you in the business of real estate???

[Account Closed]

Someone that owns rental properties may or may not be in the business of real estate. An investor that just holds rental property for the production of rental income is probably not engaged in a trade or business and would not qualify for some of the business deductions.

There are special nonbusiness deductions allowed for investors that hold rental property.

When discussing possible tax deductions it is important to keep this distinction in mind. I hear about people wanting to deduct for business travel in some scenarios where it is not likely that a business or trade could be established.

I would like to open the discussion then to what situations would clearly be business as opposed to being treated as an investor. It can be very taxing to find out in an audit that you have expenses that are disallowed. From time to time I run into this scenario most of the time a little planning could have changed the outcome, but it can be much harder to establish after the fact.