US EditionPublished • loading... • Updated
Why landlords chase this IRS tax status
REPS lets landlords offset active income with rental losses and claim accelerated depreciation but requires passing strict IRS tests and maintaining thorough documentation.
- The IRS's real estate professional designation allows landlords to apply rental losses to active income without limits and avoid the 3.8% net investment income tax, easing cash flow.
- To qualify, taxpayers must pass a three-part test including the 50% test, the 750-hour test, and the material participation test under Internal Revenue Service rules.
- Document tasks that affect daily operations, keeping contemporaneous logs and narrative summaries with appointment books, calendars, bank transactions, and dated notes to prove qualifying activities like cleaning units and collecting rent.
- Many taxpayers are disqualified for missing documentation, and the Internal Revenue Service often challenges claims, especially for taxpayers with full-time W-2 jobs or red flags like on-site managers.
- Spouses can help: one spouse must pass tests one and two while the other logs 750 hours, owners may make a binding grouping election on their return, but short-term vacation rentals are generally excluded.
Insights by Ground AI
25 Articles
25 Articles
Coverage Details
Total News Sources25
Leaning Left2Leaning Right0Center21Last UpdatedBias Distribution91% Center
Bias Distribution
- 91% of the sources are Center
91% Center
C 91%
Factuality
To view factuality data please Upgrade to Premium
