Overview · 3 min read
Real estate professional status
Real estate professional status lets rental losses offset any other income, including a spouse's tech salary. It is hard to qualify for while holding a full-time job, so it usually works when one spouse focuses on real estate.
- Who it fits
- Households where one spouse works in real estate full-time.
- Usually not a fit
- Anyone with a full-time job outside real estate.
- Figures
- 2026 tax year
The key rule
More than 750 hours a year in real property trades or businesses, and more than half of your total working time in them. You must also materially participate in the rentals.
How it works
Real property trades or businesses include developing, building, renovating, renting, managing, leasing and brokering real estate. Two tests apply to one spouse on their own:
- More than 750 hours in those activities during the year.
- More than half of all the hours they work in any job or business.
Then the couple must materially participate in the rentals, where both spouses' hours count.
3 steps
Check who can qualify
A full-time W-2 employee almost never passes the more-than-half test. A spouse who does not work elsewhere often can.
Keep contemporaneous logs
A calendar or app log of real estate work through the year, not reconstructed in April.
Make the grouping election
Grouping all rentals as one activity makes material participation easier. We file the election with your return.
Example
A couple
One spouse works at a tech company; the other manages the couple's four rentals and a small renovation business, logging 1,100 hours. With the grouping election and good logs, depreciation losses from the rentals can offset the tech salary.
Common mistakes
- This status is audited often. The hour log is your whole defense.
- Counting investor-type activity, such as reviewing statements, which usually does not count.
Key dates
- December 31
- Hours are measured for the calendar year.
Questions we hear
Does a real estate license help?
Not by itself. What counts is the hours worked, not the license.
General education for TaxSquad clients, not advice for your situation. Rules and figures change. Talk to us before acting on this guide.