What is REPS and why should you care?
Real estate professional status (REPS) is a designation given to qualifying rental property owners who materially participate in real estate activities. Eligible REPS taxpayers enjoy added tax benefits by being able to write off significant passive losses (including depreciation) from their real estate activities.
How do you qualify?
In order to be classified as a real estate professional, you must meet the following requirements:
- Own rental real estate
- Spend more than 50% of your time on real estate activities
- Spend at least 750 hours per tax year in real estate activities.
750 hours nets out to about 2 hours per day, 365 days out of the year. With these criteria, it may be difficult to qualify for REPS if you spend more than half of your time on another job.
What should you do if you can qualify?
Contact your tax advisor as soon as possible to make sure you qualify as a real estate professional on next year’s return. If so, start logging your work and documenting sufficient proof to be deemed a real estate professional for tax purposes.
Disclaimer: This content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting or tax advice.