2017 – 05/16 – Real estate investor vs. professional: Why it matters

Income and losses from investment real estate or rental property are passive by definition, unless you’re a real estate professional. Why does this matter? Passive income may be subject to the 3.8% net investment income tax, and passive losses generally are deductible only against passive income, with the excess carried forward. To qualify as a pro, you must annually perform: 1) more than 50% of your personal services in real property trades or businesses in which you materially participate, and 2) more than 750 hours in these businesses. Contact us for details.