Part-Time Real Estate Work: Testing Real Estate Professional Qualification

Part-time real estate work may qualify you for Real Estate Professional status if your spouse works full-time in real estate or other criteria are met.

You probably do not qualify for REPS. The Real Estate Professional Status test requires 750+ hours per year in real estate activities and that those hours exceed half of all your personal service hours. If you have a full-time job, a business, or any other significant time commitment, hitting both thresholds is difficult.

The $25,000 special allowance. Even without REPS, you can deduct up to $25,000 in rental losses against your other income if you actively participate in managing the property (making decisions about tenants, repairs, and leases). This allowance phases out between $100,000 and $150,000 of adjusted gross income and disappears entirely above $150,000.

Suspended losses are not lost. Rental losses you cannot deduct this year carry forward indefinitely and become fully deductible when you sell the property. Your CPA should track these suspended losses across tax years so they are not missed at disposition.

The tradeoff: Your rental losses are largely trapped as passive until you sell, which limits the near-term tax benefit of depreciation and expenses. The CPA's job is to maximize what you can deduct within these constraints and ensure nothing is left on the table when you dispose of the property.