Can a W-2 employee qualify for REPS?

Almost never. The 50% test requires that more than half of your personal services in trades or businesses are in real estate. A full-time W-2 job at 2,000+ hours/year requires real estate hours to exceed 2,000 — virtually impossible to combine.

What if my spouse qualifies but I don't?

If filing jointly, your spouse's REPS qualification allows non-passive treatment for rental losses on the joint return — for the entity that meets material participation. Each spouse's qualification is independent.

Does property management time count?

Yes — active management of own rentals counts (tenant screening, maintenance coordination, repairs you perform). Time spent on financial reporting alone or 'investor' activities does not count.

Free Qualification Check

Real Estate Professional Status (REPS) Qualifier

Section 469(c)(7) lets qualifying real estate investors offset rental losses against wages, business income, and other non-passive income. The bar is high. Six questions to find out where you stand.

Answer based on your actual current-year facts. Disqualifying answers heavily weight the verdict — these are the IRS audit pressure points.

1. How many hours per year do you spend on real estate trades or businesses?
Includes acquisition, development, construction, rental management, brokerage. Investor activities (research, money management) don't count.
2. Is your real estate work more than 50% of all personal services in trades/businesses?
If you have a full-time W-2 job, this is virtually impossible to meet.
3. Do you keep contemporaneous time logs of your real estate hours?
Daily/weekly entries written as the work happens — not reconstructed at year-end.
4. What's your filing status, and does your spouse work in real estate?
Spouses' hours can combine for aggregation but EACH spouse must independently meet the 750-hour and 50% tests.
5. Do you materially participate in each rental property?
Material participation: 500+ hours per property, OR 100+ hours and more than anyone else, OR substantially all participation.
6. Have you made the §469(c)(7)(A) election to aggregate rental real estate activities?
Election treats all rentals as one activity for material participation. Made on the tax return; binding for future years.

Answer all questions to see your result.