Updated over 2 years ago on . Most recent reply
Rep status, 100hrs, material participation
I searched a bit and could not find the answer to this. Is the 100hrs goal for materially participating per property or per portfolio? Thanks
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@Michael Jennings To be considered as materially participating in an activity, an individual must, under Sec. 469(h)(1), have "regular, continuous, and substantial" involvement in the activity. This isn't the same thing as REPS (but is required for REPS).
These tests determine whether you qualify based on your involvement in your rental property(ies). You need to meet one of them to be considered materially participating.
- Spend more than 500 hours on your rental business
- Do substantially everything for the rental business
- Spend more than 100 hours on the activity and no one other individual spends more time than you do
- Significant participation activity for more than 100 hours, and your combined activity in all significant participation activities exceeds 500 hours
- Participating in the business for five of the 10 previous taxable years
- Personal service activity (non income-producing) for three of the previous taxable years
- Regular, continuous, provable participation in the business for more than 100 hours
The first three are the ones the majority of real estate investors will evaluate and attempt to qualify for.
Generally, Treasury Regulations section 1.469-4 permits grouping of activities in your real estate portfolio to meet the material participation requirements, but if you elect to group then these activities must exceed 500 hours and there are special rules for which activities can be combined and minimum participation for each group activity.
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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.