How do I get Turbo tax to classify me as a material participant in a rental property?

Forum|Forum|1 year ago
February 14, 2025
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TurboTax Premier Online

Best answer by DawnC

Thank you, Robert. To clarify, I cannot be a material participant unless I am a real estate professional.

You can materially participate without being a real estate professional, and vice versa. The tests are different. Most landlords are active participants, but not material participants. How much you can deduct is based on how much you're involved with managing your properties.

• If you are materially participating in managing your property, you may be able to deduct all of your losses, however...

• The amount you can deduct can be limited based on your level of involvement with each property

Active Participation Rules - Most landlords; passive activity rules apply

Material Participation Rules - The main thing with material participants is that the rental activity is considered a business, so the passive activity rules do not apply.

RobertB4444

TurboTax will ask if you actively participated in the rental. The answer is yes if you

own at least 10% of the property
Make major management decisions for the property

Tell TurboTax that you're an active participant and it will structure the rental for you.

@elel

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elelAuthor

I did say that I was an active participant, but how do I say I was a material participant?

RobertB4444

Ah, TurboTax has those questions set up to classify you as real-estate professional. In order to demonstrate material participation in a real estate activity and have it be a business instead of rental activity you have to spend more than 50% of your work time in real estate related activities and have more than 750 hours in real estate activities for the year. If you qualify for both of these then you qualify as a real estate professional and the rental activity is a business and not a passive activity.

When you start the rental property TurboTax will ask if you are a real estate professional and ask about your participation in real estate activities. If you can answer yes to both of the questions then you'll be classified as a real-estate professional and all of your rental activities will not be shown as passive income.

@elel

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