Real Estate Professional Status (REPS): Who Qualifies and What You Get
Learn how meeting specific hourly requirements allows you to use rental property losses to offset other types of income.
Real Estate Professional Status is a specific designation that changes how rental property losses are treated for tax purposes.
Who it's for
This status is for property managers who spend a significant portion of their professional life working in real estate. To qualify, you must spend more than 750 hours per year performing real estate trades or activities.
What you get
Typically, rental income is considered "passive," meaning you can only use rental losses to offset other passive income. If you qualify for this status, you gain the ability to use those rental losses to offset your non-passive income, such as income from a regular job or other business ventures.
What it costs you
The primary cost is your time and administrative effort. You must maintain rigorous, detailed time logs to prove exactly how many hours you spend on real estate activities to satisfy the requirements.
The catch to know
Because this status provides a significant tax advantage, the tax authorities frequently audit these claims. Having perfect, organized documentation of your hours is the only way to defend your status during a review.
How to apply
- Track your real estate work hours daily in a detailed log.
- Ensure your total annual real estate hours exceed the required threshold.
- Report your status accurately on your annual tax filings.
- Keep all physical or digital records of your time logs in case of an audit.