TAX TIP FOR REAL ESTATE PROFESSIONALS

Image from www.themdhometeam.com

If you classify yourself as a real estate professional on your tax returns, taking appropriate tax deductions, you must have a record of your time spent on the activities.

In other words, you must be able to prove you spent the time required to be eligible for the deductions.

Fortunately, the qualifications are simple. First, you must spend at least half your personal time (not business) handling your real estate investments or over 750 hours of your personal and investor services time materially participating in the real estate business.

One spouse must meet the requirements if you are married and filing jointly, but one spouse can qualify for both.

This is just the tip of the iceberg, though.

Next, you must prove you materially participated in the real estate transactions. Again, if you’re married, the transactions of both parties count.

The easiest way to prove material participation is through the number of hours worked, and the easiest way to prove that is with a time log.

This isn’t a log you should create if you think you’re getting audited, though. It’s best to keep a log as you go. Most taxpayers who create the log after the fact lose their deductions.

Don’t let this happen to you. Contact me today to learn how to properly log your time worked so you get the deductions and reduce your chances of an audit.