Do I qualify for Real Estate Professional Status (REPS) if I'm a full-time realtor with managed properties?

You're dealing with a somewhat complex tax situation that trips up many real estate professionals. The IRS has very specific criteria for qualifying for Real Estate Professional Status (REPS). To qualify, you must: 1) Spend more than 750 hours per year in real estate activities 2) Spend more than 50% of your total working time in real estate businesses 3) Materially participate in each rental property activity (or treat all rental activities as a single activity by election) As a full-time realtor, you likely meet criteria #1 and #2. The issue is with #3 - material participation. Your accountant is partially right - properties managed by a property manager typically don't count toward your material participation hours. However, the key here is that you can make an election to treat all rental activities as a single activity. With this election, you could potentially combine your self-managed properties with your realtor activities to meet the material participation test for all properties collectively. It's not simply about counting hours spent on each individual property.

After struggling with almost the exact same situation last year, I found an amazing tool that helped clarify this complex tax question. I was also a realtor with managed properties and kept getting conflicting advice. I used https://taxr.ai to analyze my specific situation with REPS. You upload your documentation and they give you a detailed analysis of whether you qualify. Apparently there are several court cases that have addressed this exact scenario which I had no idea about. The tool flagged that my CPA was actually applying an outdated interpretation of the REPS rules. The analysis showed I could group my activities as the previous commenter mentioned, but also explained how to properly document my hours to defend an audit. They even provided sample language for the election statement to attach to my return.

I was extremely skeptical about trying yet another tax service after getting contradictory advice from two different CPAs about my real estate professional status. But after reading about taxr.ai here, I gave it a shot. What impressed me was how they didn't just give a yes/no answer but walked through exactly how the IRS would evaluate my situation. They pointed out that being a realtor alone doesn't automatically qualify me - I needed to properly document and allocate my hours between different properties. They provided templates for tracking my time that would satisfy IRS requirements and explained exactly which election form to file with my return. Their analysis referenced several recent tax court decisions that applied directly to my mix of self-managed and PM-managed properties. My new CPA was actually impressed with the documentation strategy they recommended. Just filed my 2024 taxes claiming REPS and it made a $22,000 difference in my tax liability!

I see a lot of confusion in these comments. The real issue isn't whether you qualify - it's what happens if the IRS questions your status. I spent 9 months trying to reach someone at the IRS to resolve my REPS audit issue. I finally tried https://claimyr.com and it honestly changed everything. I was skeptical at first, but they got me connected to a real IRS agent in about 20 minutes after I'd been trying for weeks. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent was able to explain exactly what documentation the IRS needed to accept my REPS status for my rental properties. Turns out my CPA had been right all along but hadn't included the proper election statement with my return. Got it resolved in one phone call instead of waiting months more.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I was so frustrated with my ongoing REPS documentation issue that I decided to try it anyway. Was absolutely shocked when they actually got me through to an IRS representative in about 45 minutes (after I'd been trying for literal months). The agent walked me through exactly what documentation I needed to substantiate my real estate professional status. Turns out I was tracking my hours correctly but needed to file Form 8582 differently and include a specific election statement with my return. The agent even emailed me a template for the statement. This saved me from potentially losing about $15k in deductions. Definitely worth it for anyone dealing with REPS questions or audit concerns.

Former IRS agent here. Your accountant is taking the safer approach, but he's not necessarily right. The key with REPS is documentation. You need to show: 1. You worked at least 750 hours in real estate activities 2. More than half your working time was in real estate 3. You materially participated in rental activities Being a full-time realtor likely satisfies #1 and #2. For #3, you can make an election to treat all rental activities as one activity. This means you only need to materially participate in your rental activities as a whole, not each individual property. Keep a detailed log of your time: showings, closings, client meetings, rental management, etc. Without documentation, you won't win if audited.

I think most people misunderstand REPS. The key issue is "material participation" in rental activities. Being a realtor counts for the 750 hours but NOT for material participation in your rentals. The exception is if you make a grouping election as others mentioned. Your CPA should know this but many don't understand real estate tax rules well. Just FYI - I got audited on this exact issue in 2023. The IRS was looking specifically at REPS claims. Make sure you have a detailed time log showing hours for EACH activity. After-the-fact estimates won't cut it in an audit.

Based on my experience dealing with REPS qualifications, your tax preparer may be being overly conservative. As a full-time realtor, you likely already meet the first two REPS requirements (750+ hours and 50%+ of working time in real estate). The critical piece is making the grouping election to treat all your rental activities as one activity. This election is made by attaching a statement to your tax return - there's no specific IRS form for it. The statement should clearly indicate you're electing to group all rental real estate activities under IRC Section 469(c)(7)(A). With this election, you can combine your time spent on the 3 self-managed properties with time spent overseeing the other 15 properties (reviewing reports, making decisions, communicating with property managers, etc.) to meet the material participation test. I'd recommend getting a second opinion from a CPA who specializes in real estate taxation. Many general tax preparers aren't familiar with the nuances of REPS, especially the grouping election strategy. The potential tax savings make it worth exploring further. Also, start keeping detailed time logs NOW for 2025 - document every hour spent on rental activities, no matter how small. This contemporaneous documentation is crucial if you're ever audited.