Real Estate Tax Professional Status

To qualify as a real estate professional for tax purposes, you must meet certain criteria set by the Internal Revenue Service (IRS). Specifically, you must meet both the “material participation” test and the “more than one-half” test.

The material participation test requires that you participate in the management of your rental real estate activities on a regular, continuous, and substantial basis. There are several ways to meet this test, including:

 

  • Spending at least 750 hours per year on your rental real estate activities
  • Participating in the management of your rental properties for more than 100 hours per year and making a significant contribution to the properties’ success or failure
  • Participating in the management of your rental properties for more than 500 hours in the tax year and no other individual participates more

The more than one-half test requires that you spend more than half of your working hours during the tax year on your rental real estate activities, or on activities that are material to your rental real estate business. This includes any time spent managing or materially participating in the rental properties, as well as any time spent preparing for and planning your rental real estate activities.

If you meet both the material participation test and the more than one-half test, you will qualify as a real estate professional for tax purposes. This classification can provide significant tax benefits.

 
Kansas City
8666 W 96th Street, Overland Park Kansas 66212

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