CREI Partners

Real Estate Investments

Building Passive Income

Episode 16: Real Estate Professional Status (REPS)

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Building Passive Income
Building Passive Income
Episode 16: Real Estate Professional Status (REPS)
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Welcome to Building Passive Income with CREI Collin

Think real estate depreciation can only offset passive income? Think again. In this episode, CREI Collin breaks down Real Estate Professional Status (REPS)—the IRS designation that allows you to use passive real estate losses to offset your W-2 income, business income, and other active income. Learn the strict requirements, common mistakes, audit risks, and whether REPS is right for you.

What You’ll Learn:

  • What Real Estate Professional Status (REPS) is and how it works
  • The two tests you must pass: 750-hour test and “more than half” test
  • How REPS unlocks suspended passive losses to offset active income
  • The $25,000 allowance for non-REPS investors (and its phase-out)
  • Material participation requirements for each property
  • Why contemporaneous time logs are critical (and how to keep them)
  • Common REPS mistakes and audit red flags
  • Strategic considerations: Is REPS worth it for you?
  • How REPS fits into long-term tax planning

Important Timestamps:

  • [0:00] Introduction: The power of REPS for high-income earners
  • [1:15] What is Real Estate Professional Status?
  • [2:30] How most passive investors use depreciation (passive income only)
  • [3:45] How REPS changes the game (offset W-2 and active income)
  • [5:00] The Two Tests: 750-Hour Test and “More Than Half” Test
  • [7:00] Material Participation: The 7 tests you need to know
  • [9:30] Contemporaneous Time Logs: What the IRS requires
  • [11:00] The $25,000 Allowance for Non-REPS Investors
  • [12:30] Common REPS Mistakes (and how to avoid them)
  • [14:00] Audit Risk: What triggers IRS scrutiny
  • [15:30] Is REPS Right for You? Strategic considerations
  • [17:00] How REPS Fits Into Long-Term Tax Planning
  • [18:30] Recap and Action Steps

Key Takeaways: ✅ REPS allows you to offset W-2 and active income with real estate losses

✅ You must pass two tests: 750+ hours in real estate + more than half your working time

✅ Material participation is required for each property (7 tests available)

✅ Contemporaneous time logs are mandatory—start tracking today

✅ Non-REPS investors get a $25,000 allowance (phase-out starts at $100K AGI)

✅ REPS comes with audit risk—documentation is everything

✅ Consult your CPA before pursuing REPS

Resources Mentioned:

Disclaimer: This podcast is for educational purposes only and does not constitute tax, legal, or investment advice. Always consult with your CPA, attorney, and financial advisor before making any investment or tax decisions.

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Ready to Build Your Tax-Efficient Passive Income Strategy? Let’s discuss how real estate investing fits into your financial plan. Schedule your free 30-minute consultation: Let’s Talk