IRC §469(c)(7)
Real Estate Professional Status (REPS)
Real Estate Professional Status changes how the passive-activity rules apply to rental real estate. A qualifying taxpayer must satisfy both statutory time tests, and losses from a rental activity become nonpassive only when the taxpayer also materially participates in that activity (or in an eligible grouped activity).
This can make otherwise suspended rental losses usable against nonpassive income, but status alone does not automatically unlock every rental loss. Contemporaneous time records and activity-by-activity participation are central to the analysis.
Who this may apply to
- Spend 750+ hours per year in real estate activities
- More than half of working time is in real estate
- Own rental properties or manage real estate
Strategy connections
Enables
- Cost Segregation Study: Qualifying real estate participation can make rental depreciation losses usable against nonpassive income, subject to activity rules.
Works well with
- Short-Term Rental Loophole: Provides a different potential path for rental losses; each has separate tests.
What could block this
- The taxpayer does not meet both real-estate time tests
- Material participation is not established
- Contemporaneous activity records are insufficient
Important considerations
- If you have a W-2 job working 40+ hours/week (~2,000+ hrs/yr), qualifying for REPS is nearly impossible — real estate hours must exceed ALL other work combined
- The IRS scrutinizes REPS claims heavily — your time log must be credible, detailed, and contemporaneous
- Each rental property is treated as a separate activity by default — the grouping election is required to aggregate hours
Professional support
Real Estate Tax Specialist
Will analyze your hours, document qualification, and maximize deductions from REPS status.
Timing
REPS qualification is determined for the full tax year — you need to meet the 750-hour and more-than-50% tests annually. Start tracking hours January 1.
Official sources
Reviewed 2026-07-24