Like millions of other landlords, I'm confronted with the task of determining whether my rental properties are a qualified business.
From what my mad Google skillz can determine, one of the key factors is whether I engage in "regular and continuous" activity related to the properties. I can't, however, find any definition or examples of this term.
Any guidance, references, or examples would be appreciated.
Thanks!
Ian, it's been a few days with no answers. I've had rental property for
30+ years. Landlords have one real question. Do they satisfy the criteria to be a real estate professional?"A taxpayer qualifies as a real estate professional if (1) more than one-half of the personal services the taxpayer performs in trades or businesses during the tax year are in real property trades or businesses in which the taxpayer materially participates, and (2) hours spent providing personal services in real property trades or businesses in which the taxpayer materially participates total more than 750 during the tax year."
Now, I'm guessing that this doesn't apply to you. What does apply is the very loose requirement that even if the activity is completely passive (I have a property manager for my one remaining rental, a 3 unit building) that you still engage with the management company. In this case, up to $25,000/yr of loss can offset ordinary income. This phases out as your AGI exceeds $100K and is gone at $150K (MFJ). Any excess loss is carried forward until it can be used (Hopefully you'll run a profit, even after depreciation) or until the property is sold.
That all said, Schedule E handles it all.
Given the short question, let us know if I completely missed the point.
The new twist this year is the qualified business income deduction. This deduction is only available if the rental activity is a "qualified trade or business," which the proposed regulations interpret as a "section 162 trade or business."
Thus the original question. What actually constitutes "regular and continuous" activity?
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