How Do the Rich Qualify for the Real Estate Professional Deduction?

If you make less than $100,000 per year and actively participate in your real estate, you can take up to $25,000 of real estate loss against your other income.

If you make over $150,00 per year, then you can’t take any of the loss against your other income.
If your income is between $100,000 and $150,000, the amount of the acceptable loss phases out. Again, though, remember that you have to actively participate.

The exception is if you or your spouse is a real estate professional and materially participate in the properties.

That’s the background. One of the questions I got over on my USTaxAid blog is what happens to someone who is rich. How can they qualify for the real estate professional deduction?

Since they’re rich, we’ll assume they are making over $150K per year, so the test is whether husband or wife is a real estate professional. That means one of them must perform at least 750 hours per year in real estate activities and more hours in real estate than any other trade or business. Only one person can meet that test. But both can add up their hours to meet the material participation test, which is 500 hours per property. You can make an aggregation election to add up multiple properties so you only need to meet the 500 hour requirement once.

The rules are the same for everyone. So if you’re looking for a way to get the write-off, you’re going to have to figure out how you can win this argument.

The best tax breaks are still there for real estate investors, but it’s up to you find them. Learn more at a special price (for a limited time) with the Real Estate Accountant in a Box at

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