RE Professional Status for Spouse

[Troy P.]

Hi all,

I believe it is common to have a situation where one spouse brings in majority of the W2 income and the other is either a stay-at-home parent, works part time, etc. and they can easily qualify as an RE professional for tax reasons.  My question is, what are the simplest or most basic ways for a spouse to qualify for this?

We have a small number of SFH LTRs that we self-manage, and we have an LLC that is currently sitting idle. I'm assuming the spouse is required to work for a legitimate business and receive either W2 or 1099 from that business, but is this the easiest route to take? Would it make sense to start your own PM company for this purpose and have spouse as sole employee who receives compensation from the small rental portfolio? I think PM makes the most sense because being an agent would require leaving the home more frequently. Am I missing anything legally or am I way off base? What are your thoughts on this? Thanks!

[Basit Siddiqi]

You don't have to go all crazy with the employee / entity.

Just create a log of the hours spent managing the properties.

The two requirements to claim real estate professional status are
1) Spend 750 on real estate related activities
2) Spend more time on real estate than a W-2 or a business.

There is no requirement about being an employee and compensation.