One of the most common questions I get from real estate investors is whether they can qualify for real estate professional status under the tax law. By doing so, all of their real estate investment losses can be deducted currently. Rosemarie is the most recent student to ask this question:

Q: How do I qualify as a real estate professional? My husband works for an employer and I am taking on the real estate investing with his help. I do not earn an income from any source. Our concern is that his income is relatively high now and we are going to lose the business and personal deductions because we started mid-year and are building the foundation to the business.

A: Real estate professional status is a fairly straightforward test. First, you must spend more than 750 hours during the year involved in real estate. Second, you must spend more time in your real estate business than all of your other businesses combined. The good news for you, Rosemarie, is that if you qualify, then your husband doesn’t need to qualify.

The other good news is that even if you don’t qualify, you don’t really “lose” your deductions. They simply get postponed until you have passive income, either from real estate or some other passive business activity. It would be a good idea for you to sit down with a qualified real estate tax specialist to go through the passive activity and real estate professional rules. We are happy to help you find someone if you don’t already have a good CPA to go to. Just contact us at cs@provisionwealth.com

Warmest regards,

Tom