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RE loss for RE professionals?

I receive W2 but my wife is a real estate professional - she spent > 50% of her time, >750 hours taking care of our real estate property and doing short term rental. I would like to use the rental income loss to offset my W2 income but your TT software does not allow that. What should I do?

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2 Replies
Carl
Level 15

RE loss for RE professionals?

Short term rental? This needs detailed clarification and how it's treated may depend on your state. You may also want to seek a definitive answer from a CPA or tax pro in your local area who will agree to be held legally liable and financially culpable for providing you incorrect information. (Good luck finding a CPA that will agree to those terms)
A short term rental is defined differently state to state, and many of those states treat a short term rental exactly as if you owned a hotel. In other words, you report the income/expenses on SCH C. Basically for all states, if you provide services (and I would find it difficult to claim you did not on a short term rental) then it's treated just like a SCH C business which makes the income active income (not passive income) and subject to the self-employment tax.
If this is an AirB&B arraignment, then it's short term, and it's a SCH C business.

RE loss for RE professionals?

Go back and make sure you answered the questions correctly.  For example, you must indicate material participation as well.  In addition, it is unclear if your wife is engaged in two activities or one activity - taking care of our real estate property as one activity and doing short-term rental as another.  If two activities, they need to be identified and grouped together.

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