Real Estate Professional Vs. Passive for Renting out SFR's

[James Harville]

Hello everyone,

I am debating purchasing a single-family residence to rent out primarily for the tax deduction benefits.  If I receive a small cash flow of $600+/month, that is nice, but mainly I want to do it for tax deductions against my personal income so that I ultimately pay less in taxes and earn more throughout the year.

Assuming I have a single member LLC with the property under said LLC, when I go to do my taxes - TurboTax asks me "Let's See if You're a Real Estate Professional"

So of course I have a few questions:

1. Can an owner of one rental property under an LLC easily qualify as a Real Estate Professional while also working a full-time job? I am not looking to become a target for the IRS. I cannot guarantee 750 hours a year, nor am I sure how it's "counted", if I find tenants, run repairs, do billing, etc does that count enough? What if I use a property management company?

2.  If I cannot qualify as a real estate professional and instead am deemed "Passive", what implications does this have towards my ultimate goal of paying less taxes?  I've read many articles, but the majority of them are complicated.  If I am passive, does that mean I can deduct $25,000 worth of deductions towards my income and no more?  i.e if I make $75,000 a year + $5000 in rentals, then my total income is $80,000 and the most I can deduct towards my income is $25,000?  Am I reading that right?

Detailed replies are super appreciated.

Thanks!