Do I qualify for Real Estate Professional Status for tax purposes?

Hi everyone, I've been investing in rental properties over the past few years and I'm trying to figure out if I qualify for Real Estate Professional Status (REPS) for my 2024 taxes. I currently own 4 rental properties that take up a significant amount of my time, but I also work as a marketing consultant about 30 hours per week. Last year I spent approximately 850 hours managing my properties (doing repairs, finding tenants, handling paperwork, etc.) and I keep pretty detailed logs of my time. My rental income was around $72,000 but after expenses and depreciation, I'm showing a paper loss of about $18,500 that I'd love to be able to offset against my consulting income. I've read that to qualify as a real estate professional, I need to spend 750+ hours on real estate activities AND more than half my working time in real estate. I'm not sure if I meet the second requirement since my consultant job takes 30 hours a week (roughly 1,500 hours annually). Does anyone have experience with this? Do I need to quit my day job to qualify for REPS, or is there another way to structure this? Thanks in advance!

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19 comments

Mei-Ling Chen

•8M

You've got the right understanding of the basic requirements for Real Estate Professional Status. To qualify, you need to: 1) Spend more than 750 hours during the year in real estate businesses in which you materially participate 2) Spend more than half of your total working time in real estate businesses Based on what you've shared, you definitely meet the first requirement with your 850 hours. However, for the second requirement, if you're working 30 hours weekly as a consultant (approximately 1,500 annual hours) and only 850 hours on your real estate activities, you don't meet the "more than half your time" requirement. You don't necessarily need to quit your day job, but you would need to either increase your real estate hours or decrease your consulting hours so that your real estate activities constitute more than 50% of your total working time. Another option is to have your spouse qualify if they can meet both requirements, as this status can apply to either spouse.

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Mei-Ling Chen

•8M

Working with real estate clients as a consultant doesn't count toward REPS hours - the hours must be spent directly managing your own rental properties or in a real estate trade/business in which you materially participate. Marketing for developers would be considered consulting work, not real estate activities for REPS purposes. Regarding your spouse, you're right - if she's working full-time as a teacher, she likely wouldn't meet the "more than half of total working time" requirement either. The IRS is quite strict about these requirements because REPS allows taxpayers to deduct rental losses against other income, which is a significant tax benefit.

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Aiden O'Connor

•8M

I was in a similar situation last year with my properties and found this amazing service called taxr.ai that really helped me navigate the Real Estate Professional Status requirements. I was so confused about what hours counted and how to properly document everything until I uploaded all my documents to https://taxr.ai and got a super detailed breakdown of exactly what qualified and what didn't. They analyzed my situation and pointed out that I was actually missing some qualifying hours I hadn't been counting properly, plus they helped me structure my documentation to withstand potential IRS scrutiny. The best part was getting a clear answer on whether I qualified instead of the wishy-washy advice I was getting elsewhere.

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Aiden O'Connor

•8M

They actually reviewed my specific time logs and pointed out areas where I could be more detailed. For example, I wasn't properly categorizing my travel time between properties or documenting phone calls with contractors. They provided a template that made it much easier to track properly going forward. The cost is completely reasonable for what you get - especially considering how much you could potentially save in taxes if you qualify for REPS. I can't remember the exact price but it was way less than what my CPA would have charged for the same detailed analysis, and definitely worth it for the peace of mind.

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Zoe Papadopoulos

•8M

Just wanted to follow up and say I actually tried taxr.ai after posting here, and wow - what a game changer for my real estate tax situation! I uploaded my time logs and property documentation, and they identified that I was missing about 200 hours of qualifying activities I hadn't been counting (mostly related to education, research, and some administrative work). With their guidance, I was able to properly document everything and they confirmed I do qualify for REPS since I work part-time in my other job. The documentation template they provided makes tracking so much easier now. Honestly wish I'd found them sooner because I probably could have qualified last year too!

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Fatima Al-Rashid

•8M

If you're struggling to get answers from the IRS about Real Estate Professional Status, I highly recommend Claimyr. When I was trying to figure out if my specific situation qualified for REPS, I spent DAYS trying to reach someone at the IRS with no luck. I tried Claimyr (https://claimyr.com) after seeing it recommended here, and they got me connected to an actual IRS agent in under 15 minutes! I was honestly shocked since I'd been trying for weeks before that. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent was able to clarify exactly what documentation I needed for my REPS claim and confirmed some activities I wasn't sure would count. Totally worth it rather than guessing and risking an audit later.

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Fatima Al-Rashid

•8M

They use a technology that navigates the IRS phone system and holds your place in line, then calls you when they've got an agent on the line. It's not a special connection - they're just using smart tech to handle the horrible wait times so you don't have to sit there listening to hold music for hours. I was skeptical too, but it actually works exactly as advertised. The way I see it, my time is worth money, and spending hours on hold with the IRS is a complete waste. With Claimyr, I was literally talking to an IRS agent while I was making dinner, with zero time spent on hold.

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Aaliyah Jackson

•8M

I need to eat my words from my previous comment. After being completely frustrated with trying to get clarification on REPS from the IRS myself, I broke down and tried Claimyr yesterday. I was STILL skeptical even after paying, but no joke - I was talking to an actual IRS agent within about 12 minutes. The agent walked me through exactly what documentation I need for claiming Real Estate Professional Status and confirmed that some of my property management activities (that my tax guy wasn't sure about) DO count toward the 750 hour requirement. Saved me a ton of uncertainty and potentially thousands in taxes. I hate admitting I'm wrong, but this service is legit. Definitely using it again next time I need to speak with the IRS.

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KylieRose

•8M

One approach I haven't seen mentioned is grouping all your rental properties as a single activity by making an election under Section 469(c)(7)(A). This doesn't help with meeting the 750 hours/50% time test to qualify as a real estate professional, but IF you can qualify, this election lets you treat all rental properties as one activity to meet the material participation test. Without this election, you'd need to materially participate in EACH property separately, which is much harder. Just something to keep in mind if you ever do qualify as a real estate professional.

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KylieRose

•8M

You can make the election in any year that you qualify as a real estate professional. It's done by filing a statement with your tax return that you're making this election under Section 469(c)(7)(A). Once made, the election applies to that year and all future years unless you revoke it. This is a huge benefit because without the election, you'd have to meet the material participation test separately for each property to deduct losses from that specific property. With the election, all your real estate activities are combined, making it much easier to meet the material participation standards across your entire portfolio.

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