If you’re wondering how to qualify as a real estate professional to deduct rental losses beyond the $25K limitation, you’re not alone. It’s a challenge to navigate real estate rules, especially as they are ever changing. The world of real estate is vast, but there are a few ways a taxpayer can be considered a real estate professional, in order to deduct rental losses. Our team at Advanced Tax Advisors can give you the advice and guidance to help you qualify as a real estate professional.

One way to qualify is if half of the services one performs during the tax year is in real estate property trades or business. This is only the case should taxpayers participate both materially and with their time of more than 750 hours. Generally, taxpayers must note their participation in all rental properties, should they have more than one. However, there is an option that allows taxpayers to pull all of the interest in the real estates collectively. This is only to help determine their financial contributions.

To qualify for deducting rental losses beyond $25k, one needs to pass an active participation test. In order 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. Though one does not necessarily need to be a property manager, per say, they do need to be active within the management choices. Otherwise, they would not be considered an active participant, and therefore would not be applicable.

Furthermore, real estate rentals are the only properties to qualify, as personal property rentals do not. It’s essential to determine the difference. Other non-applicable rentals would be private vacation homes or trust estates. Occasionally, a trust estate will have special rules, but they are particular upon time and the previous owner.

To make the most out of your rental loss deductions, work with a specialized team like Advanced Tax Advisors. Our team has years of experience working with businesses and individuals. You can’t fix what you can’t see, but at Advanced Tax Advisors, it’s all we do. Reach out to our experienced tax team today at (954) 888-6941.

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