on the worksheet did you check material participation box d
The tax law places limits on the deductibility of passive income. Passive income does not include an activity in which an individual is a material participant. A material participant is an individual who participates in an activity for more than 500 hours. An individual is also a material participant if the individual's participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. An individual may be considered to be a material participant if the individual satisfies other tests. See IRS Publication 925.
Generally, rental activities are passive activities
even if you materially participated in them.
However, if you qualified as a real estate professional, rental real estate activities in which
you materially participated aren’t passive activities. For this purpose, each interest you have in
a rental real estate activity is a separate activity,
unless you choose to treat all interests in rental
real estate activities as one activity. See the Instructions for Schedule E (Form 1040 or
1040-SR), Supplemental Income and Loss, for
information about making this choice.
Qualifications. You qualified as a real estate
professional for the year if you met both of the
following requirements.
• More than half of the personal services you
performed in all trades or businesses during the tax year were performed in real
property trades or businesses in which you
materially participated.
• You performed more than 750 hours of
services during the tax year in real property
trades or businesses in which you materially participated.
