Real Estate Professionals

If you qualify as a real estate professional you get to deduct rental real estate losses as nonpassive losses so you don't get ensnared by the restrictive passive loss rules. If your rental activities produce income, you don't want to be a real estate professional as the income can offset passive losses from other passive activity losses. To qualify you have to satisfy two conditions: 1. You have to work over 750 hours in real estate trades or businesses, and 2. More than 50% of your personal services are performed in real estate trades or businesses. Real estate trades and businesses are businesses where you materially participate and involve real property development, construction, acquisition, rental, operation, management, or brokerage. Mortgage brokers do not qualify. If you are a full time employee in a non real estate activity and have a lot of rental real estate, you have the burden of proof to keep records showing that your time spent in real estate activities exceeds the 750 hours and 50% test in a given year.