All Forum Posts by: Jason Malabute

Claiming Real Estate Professional Status (REPS) can be challenging, especially for W-2 employees focused on asset management. The IRS requires more than 750 hours in real estate activities and that more than half of your total work time is in real estate. However, asset management alone might not count if it’s considered strategic oversight rather than hands-on involvement.

Hey Mark,

You’re on the right track with logging your activities! Like Zachary and Andrew mentioned, the key is to make sure you document everything clearly. Just note the date, time, property, and who you spoke with, then add a quick summary of what was discussed (e.g., "Talked with GC for 1 hour about renovation plans, budget, and timelines for STR"). If the GC charged you for that time, add the cost in the log too.

No need to go crazy with phone snapshots, but keep emails or texts as backup just in case. The important thing is that you can only count your time spent coordinating, managing, or overseeing work, not the GC’s time on-site. So logging those conversations, meetings, or site visits you’re involved in will cover you.

Using a spreadsheet to track everything can make life easier, especially if you’re logging hours often. If it’s clear and consistent, you’re in good shape

Hi Tanya,

You’re on the right path by looking for a CPA who specializes in real estate instead of a general CPA – that makes a huge difference. I’m actually familiar with the Kansas City market, so that’s interesting!

As for pricing, every accountant and firm is a bit different. The $2,000 quote you're getting sounds about right. Many firms charge at least $1,200 for LLC returns, plus anywhere from $500 to $900 for personal tax returns, depending on complexity. Just keep in mind that pricing varies widely, so it's essential to research the firm's background. Make sure they have the experience and track record to support your goals.

Also, many CPAs who focus on real estate have only theoretical knowledge – they understand the concepts but may not have actual hands-on real estate experience. If you can find a CPA who not only knows tax strategy and preparation but has also done real estate deals themselves, that would be ideal.

That said, since we can’t self-promote or advertise in these forums, I’d recommend continuing to network and research to find the right fit.

To address these properly, we’d need to understand your complete tax situation, as many of these calculations depend on context. Additionally, TurboTax won’t be able to handle the more advanced calculations you’re trying to perform. For tasks like asset dispositions and  depreciation, you’ll need more robust tax software, or even better, the assistance of a tax professional.

I’d highly recommend you not try to handle this on your own. A professional can ensure everything is done correctly and help you avoid any costly mistakes.

Hi Spencer,

For 2025, bonus depreciation will be reduced to a 40% limit. Earlier this year, the government did not renew or pass any law to extend bonus depreciation back to 100% after 2027, so the current phase-out schedule remains in place.

In the meantime, I would recommend doing some tax planning to assess where you stand in terms of projected tax liability for 2024. If you find that you really need a deduction, it might be worth exploring the possibility of pushing the closing on your property into 2024. This way, you could perform a cost segregation study this year and benefit from a higher bonus depreciation rate of 60% for 2024.

Just a heads-up, land itself isn’t depreciable, but the building on it is. To figure out the land value , the county assessor’s website should have a breakdown of the assessed value for both the land and the building. I would talk to the county about how they calculated the assessed value.

It depends on whether you’re using cash or accrual basis accounting. If it’s accrual, you’d record it in 2023 when the expense was incurred. If it’s cash basis, you’d record it in 2024 when it’s actually paid.

it really depends on the county. I’d suggest reaching out to Horry County directly to ask if they have any abatement programs to potentially reduce your property tax. Also, consulting with a lawyer who specializes in property tax abatement and deductions could help.

Here's a real life example of what Austin said above. 

Since I’m a general partner on two multifamily deals and I spent over 750 hours on those deals this year, I would use a “grouping election” to qualify as a real estate professional. I can prove my hours because I started my accounting firm in late September, which means for the first eight months and three weeks of the year, I was fully focused on managing my two multifamily properties.

By using the grouping election, all of my real estate activities would be treated together. This means I can count my participation across both properties, making it easier to meet the qualifications. As a result, I wouldn’t need to show material participation for each property individually, and I could potentially use the losses from these deals to offset other income.

Even though I qualify as a real estate professional, it’s important to remember that active participation is still required to use those losses against W-2 income.

Hi Felicia,

It sounds like you’re diving into the tax benefits of real estate, which is great! Here’s a breakdown:

For real estate investors, the $25,000 Real Estate Loss Allowance is available if your modified adjusted gross income (AGI) is less than $100,000. This allowance lets you deduct up to $25,000 in passive real estate losses to offset other income (like W-2 wages). However, once your modified AGI is between $100,000 and $150,000, this allowance begins to phase out. Once your modified AGI exceeds $150,000, the allowance is fully phased out, meaning you can no longer deduct these passive real estate losses. If your adjusted gross income is between $100,000 and $150,000, you can deduct up to ($150,000 – Your Income)/2.

Since you and your husband are high-wage earners (assuming your income is over $150,000), you would not qualify for this loss allowance unless you can qualify as a real estate professional. A real estate professional can use real estate losses to offset W-2 or other income, but you would need to meet both the:

1. 750-hour rule – You must spend at least 750 hours per year in real estate activities.

2. 50% rule – More than 50% of your working time must be spent on real estate.

Since both of you have W-2 jobs, it might be difficult to meet these requirements unless one of you dedicates significant time to real estate.

Another option could be buying multiple rental properties. While you can’t use real estate losses to offset your W-2 income, you can use losses from one rental property to offset the income from another. Over time as rental income replaces earned w2 income, if one spouse quits their W-2 job to focus on real estate, that spouse could qualify as a real estate professional, allowing you to use real estate losses to offset the other spouse’s W-2 income.