How many people qualify as a Real Estate Professional for taxes?

Question

How many people qualify as a Real Estate Professional for tax purposes? Are you more of a buy & hold investor or a house flipper? Somewhere in between or something else all together?

Brandon Hall · Answer

@Nick Colvill over half of our clients qualify as an RE pro and most of them are from BP. Generally can't have a full-time job and must work 750 hours and greater than half your time in a real estate activity.

You then have to demonstrate that you materially participated in your real estate activity in order to actually deduct the passive losses. Many people forget about that.

Hardest part about qualifying? Tracking your time. This lady, who owned 8 units, learned the hard way: https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=11587

Michael Plaks · Answer

@Nick Colvill

You started by asking whether the people who qualify are flippers or landlords. REPro is irrelevant for flippers, whether they qualify or not. It is ONLY needed for landlords, and only those who have losses that they cannot fully take. Which is either because they have too much losses or too much income, or both.

@Brandon Hall must have a highly targeted clientele if more than half qualifies. My firm serves a mixture of investors, and only half of them do have rentals properties. Of those who do, over half have full-time 40-hr W2 jobs that disqualifies them right off the bat (unless the spouse qualifies).

Of those who could benefit from REPro status, less than half actually qualifies. That's still dozens of clients.

I'm not sure how you can get a good measure by asking "how many of you qualify."

Nick Colvill · Answer

I didn't start this thread as a beginners "how-to" thread for qualifying as a real estate professional; i'll let people do their own diligence and research and figure out if its for them. I am curious as to how many people in here are actually currently qualifying for it and taking advantage of it

Natalie Kolodij · Answer

As @Lance Lvovsky mentioned most with full time jobs wont qualify.

There is an hours requirement but also it states that you MUST spend more time on REI than any other activities(s)

A read a tax case not too long ago where a surgeon tried to qualify because he self managed his whole portfolio, yadda yadda...

Ultimately the IRS said you're in the Operating room for 10 hours a day 6 days a week. Your job is surgeon, not RE pro.

Lance Lvovsky · Answer

Did you ask your CPA what the rules are for qualifying as a real estate professional? If not, you should. Answers here should not be construed as tax advice.

With that being said, if you have a full-time job, generally you won't qualify, although there are exceptions (as with everything in tax law)!

How many people qualify as a Real Estate Professional for taxes?

How many people qualify as a Real Estate Professional for taxes?

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