Since retirement over a year ago my wife and I have been renovating our rental units, doing the work ourselves or contracting as needed. Does working 2-3 days a week (8+ hrs per day) on this qualify us as real estate professionals for tax purposes? The rental property is an LLC in Missouri with us as owners.
If so does having a calendar record of the days we worked count as documentation of our hours?
We also have documentation of materials and contracted work for each unit renovated.
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Spending more than 750 hours in real estate alone is not sufficient to qualify as a real estate professional. You need to pass all the following four tests.
In Turbotax, you need to check both boxes saying that you spend more than 750 hours a year actively involved in real estate and that you spent more than 50% of your work-related time involved in real estate.
You are a real estate professional if all of the following are true:
- You materially participated in a real property trade or business.
- More than half of your time is involved in real estate activities during the year.
- You materially participated for more than 750 hours in this business.
- You materially participated in each rental real estate activity.
A real property trade or business is any business that involves property:
- Development
- Construction
- Redevelopment
- Reconstruction
- Acquisition
- Conversion
- Rental operation
- Management
- Leasing
- Brokerage
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