Hello everyone, I hope that this tax season goes great for you. I am trying to find an answer for this.
I am a carpenter, and my wife and I own a 3-unit apartment building. We live in one unit and rent the other two, I am the only one who manage and meantain the building, such as snow removal, lawn care, trash removal, roofing, the building, etc.
I collect rent and take care of any issues that might arise with our tenants. I built a concrete walkway last summer and rebuilt the steps all in 2022.
It is an older building built in 1903. But I am still wondering if I meet the real estate professional status because I receive a W-2 from the construction company I work for, but I am not an owner at work.
Please let me know what you think. Thank you for your time
Just a random person on the internet, so don’t take my advice.
From what you said, I doubt it. If you are a 40hour/week carpenter, you would need to work 40+ hours a week on your one 3-Family. I doubt you work that many hours per week on your rental.
Real Estate professional (REP) requires you to meet specific criteria. Give it a quick google search. I believe it is 750 hours per year minimum, your main occupation, material participation.
I think it would be hard (not impossible) to prove if you have a main w-2 40 hour per week job. Also, you’d have to have losses on your rentals you wish to offset. If you have no losses on your rentals, then there is no benefit to the REP designation. From my perspective, the only benefit of REP is to offset losses from rentals against your “earned income”. You can write off some passive losses each year anyways, so see if your losses exceed the maximum annual write off to make REP worth doing. Also, any excess losses beyond what you can take in a year, can be offset in the future such as when you sell a rental in the future.
Thank you very much for your responding. I have already done many Google searches that is what led me here as the majority of the examples I see in list physician and real estate brokers but it doesn’t give an example if you’re a construction worker I did however, find information if you own a construction company but nothing for construction workers who are in the field of construction and work for the company. This is what led me to asked this question. It list construction and reconstruction in the attachment below, as a carpenter my W2 income is in construction and reconstructions with over 2,000 plus hours per year.
With 2000+ hours a year, from my understanding, this wouldn’t work for you. If your spouse was to be the property manager and to put in the 750 hours (perhaps with also being a realtor), that avenue would work and any losses on your rental could be offset against your construction income.
I’m not sure if you noticed or looked at the attachment. If one was to look at the attachment I send it states that you need to spend more than one half or a minimum of 750… minimum, of your time in construction I spend all my time in construction. Thank you for sharing your opinion however I will take it under advisement, while I wait for Mark to answer. Thank you for your time.
The gist of it…you don’t own the construction company in which you receive a W-2. Thus, you don’t meet the first test. Don’t focus on the hours. They are irrelevant. You have to meet all 3 tests. Sorry. PLEASE consult with your tax advisor on this. Don’t rely on google. Sorry again. mjk
Sorry again. mjk