Who is a Real Estate Professional? Tax Loopholes and Time Log Requirements Explained

🏡A real estate professional must spend more than half of their work providing services related to real estate property trades or businesses.

🕒To qualify as a real estate professional, you must have worked more than 750 hours during the year in real estate activities.

💼Being a real estate professional has tax advantages, such as being able to fully deduct net losses against other types of income.

💸The downside of being a real estate professional is that net income is taxed at ordinary income rates and subject to self-employment taxes.

📝Keeping track of your hours and maintaining proper documentation is crucial to qualify as a real estate professional.

What are the requirements to qualify as a real estate professional?

—To qualify as a real estate professional, you must spend more than half of your work providing services related to real estate property trades or businesses and have worked more than 750 hours during the year in real estate activities.

What are the tax advantages of being a real estate professional?

—As a real estate professional, you can fully deduct net losses against other types of income, such as employment income, business income, dividends, interest, pensions, and retirement plans.

Are there any downsides to being a real estate professional?

—The downside of being a real estate professional is that net income is taxed at ordinary income rates and subject to self-employment taxes.

What should I do to qualify as a real estate professional?

—To qualify as a real estate professional, you should keep track of your hours and maintain proper documentation to demonstrate that you meet the criteria of spending more than half of your work in real estate activities and working more than 750 hours during the year.

Where can I learn more about becoming a real estate professional?

—You can check out the Real Estate Crash Course and free worksheet provided by the Business Finance Coach for detailed information on how to become a real estate professional.

00:00In this video, the Business Finance Coach explains who qualifies as a real estate professional and the tax implications of this classification.

03:40To qualify as a real estate professional, you must spend more than half of your work providing services related to real estate property trades or businesses and have worked more than 750 hours during the year in real estate activities.

05:02Net losses as a real estate professional are fully deductible and can be used to offset other types of income, but net income is taxed at ordinary income rates and subject to self-employment taxes.

06:51Keeping track of your hours and maintaining proper documentation is crucial to qualify as a real estate professional.

07:18To learn more about becoming a real estate professional, you can check out the Real Estate Crash Course and free worksheet provided by the Business Finance Coach.