Real Estate Professional Status is the gateway that can turn rental losses from passive (trapped, generally not deductible against other income) into non-passive, fully deductible losses — but it requires passing two separate IRS tests, not just one.
How it works
The 750-hour test checks whether real property trade or business hours exceed 750 for the year. The more-than-half test checks whether those same hours exceed half of all personal service hours across every trade or business. Both must pass to qualify.
What this does not include
This does not include the separate, activity-by-activity material participation test each individual rental property must also clear (or a grouping election combining them) — REPS alone doesn’t automatically make every rental loss non-passive without also clearing that additional hurdle.
How to use this calculator
- Enter your hours in real property trades/businesses and total personal-service hours across all trades/businesses.
Frequently asked questions
Can a W-2 employee qualify as a Real Estate Professional?
It’s difficult but not impossible — since the more-than-half test compares real property hours to *total* hours across all trades or businesses, a full-time W-2 job usually makes clearing 50% very hard unless real estate hours are exceptionally high.
Does REPS status apply per spouse or per household on a joint return?
Per spouse — on a joint return, only one spouse needs to individually meet both tests; the hours of each spouse aren’t combined to meet the thresholds together.
Do property management company hours count toward my total?
No — only hours the taxpayer personally performs count; hiring out management activities to a third party doesn’t build REPS hours for the owner.
