Real Estate professional status

[Judah Bailey]

Hello, I had a question about being seen as a real estate professional for tax purposes. If I'm "House Hacking" my primary residence does that count as hours towards my 750 per year?   

[Jeff Copeland]

Your best bet is to ask a CPA who is an expert on REPS, such as @Taylor Brugna. 

My thoughts: If you are renting out bedrooms in an SFH, then probably not. The IRS doesn't care that you have roommates, and that doesn't make you a real estate professional.

If you are renting out units in a multifamily (say renting three while you live in the fourth unit of a quad), then you could probably count the leasing and maintenance activities associated with the three units that are rentals. But you'd have a very hard time convincing the IRS it takes you 750 hours per year to manage three units, so this would probably work best as part of a larger portfolio as your footprint grows.

It also depends on your employment situation. Real estate also has to be your primary occupation. 

"To qualify as a real estate professional, a taxpayer must meet the following two criteria (IRC Sec. 469(c)(7)(B):

1. More than one-half of the personal services performed in all trades or businesses by the taxpayer during such taxable year are performed in real property trades or businesses in which the taxpayer materially participates, and
2. Such taxpayer performs more than 750 hours of services during the taxable year in real property trades or businesses in which the taxpayer materially participates."

The above is from the awesome free guide to REPS status at https://www.therealestatecpa.c... (Not my link, I have no affiliation with them, so I'm not self promoting)