How to Materially Participate to Deduct Rental Property Tax Losses


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A big question for many is how to materially participate to deduct rental property tax losses. It’s a common question, and rightfully so. If a rental property has tax losses, naturally, an individual will want to be able to have access to the $25,000 deduction allowance. Sometimes, a person is not applicable because they have earned too much money, however striving for a real estate professional status may be an option.

How does one qualify as a real estate professional?

First, one must gain the title. Lawyers, CPA, MD, or business owners can all qualify as real estate professionals. The qualifications for the tax year include working more than 750 hours in a real estate business or with real estate trades. Additionally, one must have more personal service hours within the rental properties than they do in any other activity, and one must materially participate as well.


How does one materially participate?

If an individual is married, they can both count their combined personal service hours. However, to truly get the deduction desired, one or a married couple must pass three tests, and that’s having more than 750 hours, more time than any other activity, and being financially involved. To pass, one should make the necessary management decisions, including repair decisions, capital decisions, recruiting, selecting new residents, creating contract terms, and one must also have at least 10% interest in the property.

At Advanced Tax Advisors, we understand how common it is for there to be questions about what you’re eligible for and what you’re not. That’s why we offer our consulting and advising services to help make the tax year easier. Our excellent eye for information, possible deductions, and your best interest make us great allies. You can focus on what you do best, while we help you save money and prepare smarter. Call (954) 888-6941 today to learn more about how to materially participate to deduct rental property tax losses.

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Jose A. Ramirez

Jose A. Ramirez is a corporate accountant turned entrepreneur who has dedicated his life to helping businesses develop CASH SAVING SYSTEMS.
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