A real estate professional can offset all passive lossesEven though words "passive losses" sound like loosing, actually they are about making money or more accurately, keeping them at tax time. By getting the real estate professional designation, high income taxpayers can take advantage of all real estate losses and subtract them against all other forms of income for a smaller adjusted gross income number. You keep your money this way. You must pass two tests to determine if you are a real estate professional:
What is a "qualified real estate activity"?"Qualified real estate activity" is anything you do in which you "develop, construct, reconstruct, acquire, convert, rent, operate, manage, lease or sell" real estate. The key is, you do not necessarily have to be the one performing the work, you can be supervising, meeting, planning - all of the activities that go into running a business. I highly recommended in Property Management business forms to keep good track of the time you spent, how many hours every day working the real estate business, using a Monthly Planer. One more thing. You have to own a minimum 5% of the real estate you do business for.
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