A two-test checklist for households considering Real Estate Professional Status — before either of you reorganizes a career around it. Fill this out on paper first. Bring it to your Tax Savings Review.
Real Estate Professional Status isn't a form you file — it's a status one spouse earns by clearing two tests, honestly, over the calendar year. But REPS is only step one. Clearing it removes the automatic "passive" label from your rental activity — it does not, by itself, make the losses deductible. A separate test, material participation, decides that. Clear both, and rental losses offset your household's W-2 income directly, dollar for dollar, on every property you own.
More than 750 hours during the year in real property trades or businesses: development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage.
That same spouse also spends more time on real estate than on every other job or trade or business, combined. This is why it's rarely the higher W-2 earner — their existing job already eats the majority of their hours.
Clearing REPS doesn't make your losses non-passive by itself. You still have to materially participate in each rental activity (Treas. Reg. §1.469-5T) — most cleanly by hitting 500 hours. There's also a 100-hour path, but it only works if no one else — including a property manager — spent more time on it than you did.
Without it, material participation is tested property-by-property — and most households who'd clear 500 hours across the whole portfolio still fail it property by property. Filed correctly and on time (Treas. Reg. §1.469-9(g)), it lets all your rental real estate count as one activity for this test.
Check every activity that's realistically part of the plan. Real property trades or businesses include:
| Activity | Typical time | Your est. hrs/yr |
|---|---|---|
| Property search & acquisition (per deal) | 40–80 hrs | |
| Tenant screening & leasing (per unit/yr) | 15–30 hrs | |
| Maintenance coordination & site visits | 2–5 hrs/wk | |
| Bookkeeping & owner administration | 2–4 hrs/wk | |
| Vendor sourcing & oversight | 1–3 hrs/wk | |
| Education directly tied to the properties | varies | |
| Total estimated annual hours | need 750+ |
These are planning estimates, not audit-proof figures — that's what the contemporaneous log is for (see page 5). If your honest total is well under 750, that's useful information now, not in April.
Test Two compares real-estate hours to every other job or business the same spouse works. Fill in both columns for each spouse being considered.
| Spouse A | Hrs/wk — other jobs | Hrs/wk — real estate | Clears Test Two? |
|---|---|---|---|
| Primary W-2 job |
| Spouse B | Hrs/wk — other jobs | Hrs/wk — real estate | Clears Test Two? |
|---|---|---|---|
| Primary job / none |
Two or more "N" or "Unsure" answers means this is a conversation before it's a plan — bring this page to the Tax Savings Review and Matt will work through it with you, hours first.
Most REPS claims that fail, fail here — not on the law, on the paperwork. Hours reconstructed after an audit letter arrives don't hold up. Hours logged the week they happened do. Here's the format that survives:
| Date | Property | Activity | Hours |
|---|---|---|---|
| Mon 3/2 | 142 Elm St | Walkthrough with contractor; scoped kitchen repair | 2.0 |
| Tue 3/3 | Portfolio | Reviewed & approved 3 vendor invoices; updated books | 1.5 |
| Wed 3/4 | 18 Bay Rd | Screened 2 tenant applicants; reference calls | 2.5 |
| Fri 3/6 | Portfolio | Sourced & toured a new acquisition candidate | 4.0 |
| Sat 3/7 | 142 Elm St | On-site for contractor punch-list sign-off | 3.0 |
1. The date it happened (not reconstructed later) · 2. Which property or activity · 3. What was actually done · 4. Hours, honestly rounded
These same hours prove two different things at once: REPS status, and material participation in the specific activity. One log, two bars to clear — which is exactly what Matt's log system builds for you in Step "Verify" of the PROVEN process, starting the week you start, not the week of an audit.
Twenty minutes, your last tax return, and this checklist. You'll leave with a written verdict — including an honest "not yet" if that's what the hours say — and, if it clears, the exact number REPS could unlock this year.
100% credited if you proceed. The 3× guarantee: if we can't identify a legal path to savings worth at least three times the fee, you don't pay.
Email: Matt@WRTAdvisors.com · Phone: (617) 648-7413
This checklist is general education, not tax or legal advice, and doesn't create a client relationship. Real Estate Professional Status requires more than 750 hours per year in real property trades or businesses and more time in those activities than in all other work combined (IRC §469(c)(7)). REPS removes the automatic passive characterization of rental activity — it does not by itself make losses deductible. The qualifying spouse must separately materially participate in each rental activity under the standard tests (Treas. Reg. §1.469-5T) — commonly 500 hours, or 100 hours only if no other person, including a property manager, participated more — tested property-by-property unless a valid grouping election is filed under Treas. Reg. §1.469-9(g). Only one spouse on a joint return needs to qualify for REPS. Whether your household clears these tests depends on your specific facts and documentation. No tax outcome is ever guaranteed.
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