Spouse or Myself as Real Estate Pro Status

[Josh Garner]

I'm sure there's another one of these threads out there, so feel free to redirect me.

I'm a full-time mortgage lender (not broker - we lend our own money). My wife works just a couple hours a week as a fitness instructor. We are both very active in our rentals (acquiring, managing, renovations, etc) and in the flips we've done, though we do have limited property management in place for our rentals now.

My income this year will be such that Real Estate Pro status will really benefit us and I'm curious what success stories folks have heard for a situation similar to ours where an individual was able to claim this status. Seems like documentation (timelogs, etc) is very important in case of audit, as well as meeting the IRS-defined qualifiers (material participation of 750+ hours and over 50% of work done in real estate). 

I'm also aware that a mortgage broker has been disallowed by the IRS for this status, however in the case that decided that (Hickam, T.C. Summ. 2017-66) the individual was a broker - not lending their own money - and he was an independent contractor, which I am not.

Feel free to share your stories and scenarios!

[Michael Plaks]

@Josh Garner

Lending does not qualify. However, I'm not sure what you mean by a "full-time mortgage lender" - how many hours a week does it take? If, for example, you spend 10 hours per week in your lending business and 20 hours per week managing your rentals and flips, you might qualify yourself.

Your wife might qualify if she meets the 750-hr test by herself. Only one of you needs to qualify.

A definitive conclusion on whether you or her qualify requires a thorough discussion with a tax pro.