Originally Posted by brewbag
Help, must we be a professional with a license in order to use the material/active participation checkbox? I am an engineer by day and a serious investor/property mgr by nite, but no license, just manage/repair my own properties (9 separate houses)
To meet the active participation rule you must own at least 10 percent of the property and have made management decisions or arranged for others to provide services in a significant and bona fide sense. Examples of active participation, according to the IRS, include advertising rentals, collecting rent, making repairs or hiring someone to make repairs.In general, renting property is classified as a "passive activity" by the IRS since you are providing an asset from which you receive income which is classified as passive. An exception to the limitation on deducting passive losses is provided for rental real estate in which you "actively participate. If you meet the active participation test, you can subtract up to $25k in passive losses from your nonpassive income. So, you will be considered active if you are involved with the operation of your rental. However, you must be exercising independent judgment and not simply ratifying decisions made by a manager or management company.