Real Estate Professional status election

[larisa322]

Considering that I qualify for RE Professional status in 2018, do I need to make this election that I am RE professional by writing a statement/election that needs to be attached to my tax returns? Or just checking appropriate boxes in Turbotax program (750 hours and more than 50% time) is enough to claim this status?

[DDollar · Accepted solution]

No you do not need to attach a written statement. Just check the appropriate boxes in TurboTax. 

You qualify as a real estate professional for the tax year if you meet both of the following requirements.

• More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate.

• You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate.

[larisa322]

Thank you, David!

[DDollar]

You're welcome!  Thanks for using TurboTax!

[turb0716]

I did select "Real Estate Professional Selection" with two conditions satisfied.

But the my TurboTax 2018 does not give me the maximum loss deduction.

It seems that it ignore my selection and still  using out total income to setup maximum loss limit.

Why???

turb0716

[soulmist]

@DDollar 

Can you clarify something for me - 

When it says you are considered to be a real estate professional if "more than one half of personal services you provided" were performed in a real property trade I am very confused as to what "personal services you provided" means...

For example: 
I am a homeowner who moved to another state and rents out my property to tenants. I work a separate full time job as a missionary. For 6 months of the year I had a property management company taking care of the property, and for the other 6 months of the year I myself took care of managing the property. 

Does this "personal services provided" refer to my interacting with the tenants within my capacity as a landlord, (in which case, yes 50% of my work was my own doing - and I own the property) - or does it refer to something else? (in other words - you need to actually be running and maintaining properties as a manager or landlord as your main job) ? 

[KarenJ2]

If you have other employment and have a property management company taking care of the property, then you cannot be considered a real estate professional. As you have a full time job as a missionary, you could not spend more than half of your work dealing with your rental.  

You should though say that you materially participate in the rental.

[tfhatley]

2019 isn't recognizing my RE professional status and if it is I don't see where our K-1 loss is being deducted from our taxable income.

[DaveF1006]

Is this a K1 from a partnership? If so did you indicate that you are a general partner and indicate that you actively participated in the rental real estate activity? 

[tfhatley]

Yes to each

[tc32]

how do you calculate or prove you spend more than 50% of your personal services time as a rental (s) owner and landlord?

[VictoriaD75]

Contemporaneous records of services performed must be kept which includes who performed the service, description of service, the date of the service, and how long it took (who, what, when, and how long).

The tax law provides a safe-harbor under which income from rental real estate (even if treated as passive) can qualify as qualified business income (QBI). The requirements are:

1. 250 hours or more are spent by the taxpayer with respect to the rental activity
2. Contemporaneous records of the time are maintained
3. Separate books and records for the rental activity are maintained

Time spent related to the rental activity on advertising, negotiating with tenants, verifying applications, daily operation, repair and maintenance, purchase of materials, and supervision of employees all count toward the required 250 hours. Time spent purchasing or financing the acquisition of the property and time spent traveling to and from the property do not generally qualify.

QBI on Rental Income