How to determine the material parcitipation
My husband is a real estate agent and he is managing the 3 rental properties that we have. When I am filling out the rental portion, the following question pops up:
"
What Material Participation Means for Real Estate Professionals
If you're a real estate professional you can deduct all of your losses from your rental properties if you can prove that you materially participate in their management. It's important to keep records for all your activities.
You are materially participating if:
- More than half of your personal services are provided for your real estate business, and
- You spend more than 750 hours each year on each property"
To me, that "more than 750 hours each year on EACH property" does not make sense. 750 hours means about 18 weeks of full-time hours (40 hours a week). And that is for ONE property? Anyone can confirm?
I was also trying to google, and got different answers:
"Tests for Material Participation
To materially participate in a real property trade or business, the taxpayer must be involved in the operations of the activity on a regular, continuous, and substantial basis. The seven tests that measure this are:
- The individual participates in the activity for more than 500 hours during the tax year.
- The individual’s participation in the activity for the tax year constitutes substantially all of the participation in such activity of all individuals (including individuals who are not owners of interests in the activity) for the year;
- The individual participates in the activity for more than 100 hours during the tax year, and the individual’s participation in the activity for the tax year is not less than the participation in the activity of any other individual (including individuals who are not owners of interests in the activity) for the year;
- The activity is a significant participation activity for the tax year, and the individual’s aggregate participation in all significant participation activities during the year exceeds 500 hours;
- The individual materially participated in the activity for any five tax years (whether or not consecutive) during the 10 tax years that immediately precede the tax year;
- The activity is a personal service activity, and the individual materially participated in the activity for any three tax years (whether or not consecutive) preceding the tax year; or
- Based on all of the facts and circumstances, the individual participates in the activity on a regular, continuous, and substantial basis during the year."
Does anyone have any idea?
