Real estate professional status
An IRS tax status that lets rental losses offset other income without the usual passive activity limits. Strict tests apply: 750+ hours in real estate and more than half your working time.
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Part 1 of 4
Why a seller cares
A seller who qualifies as a real estate professional has been deducting rental losses against other income all along. It changes what the sale means for taxes, and the tests are strict enough that it is worth a professional's confirmation.
Part 2 of 4
A simple example
You manage your own rentals full time and log 1,200 hours a year. You meet the tests, and your rental losses offset your spouse's salary each year.
| The test | What it asks |
|---|---|
| 750 hours a year in real estate | Documented, not estimated |
| More than half your working time | A full-time job elsewhere usually fails this |
| Material participation in the rentals | Actually running them |
REPS turns passive losses into current ones. The hours have to be real and written down.
Part 3 of 4
What people get wrong
That owning rentals makes you a real estate professional. The status is about hours and participation, and most landlords do not qualify.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines real estate professional status in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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