How to Qualify for Real Estate Professional Status (REPS) – FULL GUIDE

Real estate investors are eligible for some of the best tax breaks in the US tax code. However, there are strict rules for real estate investors when it comes to using real estate losses to offset W-2 income. For example, only people who qualify as “real estate professionals” or who meet certain other criteria such as having a short-term rental can do this.

In this video, tax expert Karlton Dennis breaks down all of these rules and explains how real estate investors can have their spouses qualify for “real estate professional status.” If a couple is married and files jointly, then only one spouse needs to qualify as a real estate professional in order for them both to use real estate losses to offset W-2 taxes.

Real estate investing can not only be a great way to generate powerful cash flow and to experience asset appreciation, but it can also be an amazing way to lower taxes when it is used correctly. So, this video is helpful for anyone who wants to learn how to leverage the real estate tax laws to save money in taxes.

CHAPTERS:
0:00 Intro
0:06 Real Estate and Taxes
0:55 The Two Main Ways to Save Money on Taxes with Real Estate
1:24 Real Estate Professional Status
2:55 The Problem with Real Estate Professional Status
3:56 Spouses and Real Estate Professional Status
4:48 Example of Tax Deductions as a Couple Using Real Estate Professional Status
7:27 The Bottom Line
8:07 Question from a Subscriber!
8:37 Outro

*Disclaimer: I am not a financial advisor nor am I an attorney. This information is for entertainment purposes only. It is highly recommended that you speak with a tax professional or tax attorney before performing any of the strategies mentioned in this video. Thank you.

#reps #realestateinvesting #realestatetaxtips

[karltondennis]

Subscribe to the channel to help us reach 1 million subscribers!!!

[brianfolkestad]

My Fiance and I are slowly working towards full time Real Estate investing as our daily job. Always trying to learn more about taxes and how it affects our properties and future properties. Thanks for the positive energy and knowledge.
Just subscribed to stay informed I've never subscribed to anyone that's saying something.
Thanks Boss

[carolpowell]

Great information! We are working on buying our first investment property. My husband has a full-time job & I am a realtor.

[TheRoundBox]

Always very informative videos, thx for creating and sharing!

[RoxyRentalsSO]

Would the hours I have spent remodeling a house hack (lived in during the remodel), where i took a 6b3b sfr and split it into a 4/2 (currently my primary residence) and an attached 2b2b adu that was placed into rental service in aug 2024, count towards REP hours? Would it be better to move out now that the remodel is complete, for cost seg this year?

[nopullbak]

As a real estate professional, can real estate losses offset portfolio income, for example will depreciation expense offset long term or short term capital gains on other investments such as stocks, commodities, forex, crypto, or interest income from bonds or savings accounts?

[The.Wooski]

Can I work in any field of construction to qualify for REPs ?
For example, I install gas main throughout the city, but doesn’t have anything to do with General construction do I still qualify?

[humbertohernandez]

I'm purchasing a new house and want to rent out my old house. Can I hire a property management person to deal with the rental and still be able to get tax savings? It's not possible for my wife or I to do the work to qualify as a REP.

[echin]

What about depreciation tax recapture upon sale? Even after 1031s, seems like the only way to truly avoid the tax bill is die and step up basis for dependents. Agree?

[TinoMiller]

My grandmother does all of this wither her properties, both her private communities, and her vacant lots and commercial properties ... Nonetheless I only got my license ... She's been doing this for more than 40 years.

[carissakirk]

If I work 14 days a month as a physician, could I qualify for REPS status?

[THEtaxstrategists]

Karlton - generally accurate information, Good for you. I will just point out that the example couple "saved" $18k of tax. QUERY: Is this enough to make an investment in r/e if otherwise you would not? I suggest NO. Sure, Real estate CAN be a good investment. Especially for your "younger viewers" (say under 40) they should FIRST decide what is a good investment (e.g. real estate, stock market, other) and if they choose real estate, THEN and ONLY THEN, look for ways to minimize taxes. Lastly, unless they do 1031s for decades, they WILL recapture this tax benefit and the recapture rate will likely be much higher than the 22.5% they saved - interested in comments from all and KD!

[jamiemauser]

Let’s say the husband and wife are both dentists…
So the wife is the one who has to quit her job to become the real estate professional?
Kinda sexist to assume the man has the better job and the woman is “just a para”

[bngr_bngr]

If Susan gets a divorce from Steven. She will be entitled to most of the real estate assets.

[isaacspragg]

Please please wear a shirt in your size - the sleeve seams are almost on your neck. Good info however. Thanks