Deductions & credits

It depends. Here is the key difference if you qualify:

Qualifying as a Real Estate Professional (REP) under IRS rules transforms rental activities from passive to active, providing significant tax advantages over standard active rental participation. The main benefits include unlimited deductions of rental losses against W-2/ordinary income, exemption from the 3.8% Net Investment Income Tax (NIIT), and enhanced use of accelerated depreciation

Rules you must meet to be considered a real estate professional are:

1. more than one-half of the personal services you provided during the year were performed in a real property trade or business in which you materially participated, and
2. the number of hours in which you materially participated in this real property trade or business was more than 750 hours, and
3. you must materially participate in each rental real estate activity unless you filed an election to group all rental real estate activities as one and still met the material participation rules.

A 'real property trade or business' means any real property development, redevelopment, construction, reconstruction, acquisition, conversion, or rental operation, management, leasing, or brokerage trade or business.
 

Personal services performed as an employee are not treated as being performed in a real property trade or business unless you are a more than 5% owner of the trade or business.
 

For joint return purposes, the eligibility requirements are considered met if either you or your spouse separately satisfy the requirements.

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