Real Estate Professional Status (REPS): The Hours Test

First: more than 750 hours per year in real property trades or businesses in which you materially participate. Second: more than half of all personal services you perform during the year are in those real estate activities.

Both must be met. Missing either disqualifies you.

If your W-2 job consumes 2,000+ hours a year, you can't realistically beat it with real estate hours. For dual-earner households, REPS usually requires one spouse to commit the majority of working time to real estate.

Even if you meet the 750-hour test, each rental activity must individually meet a material participation test — unless you elect to aggregate all real estate activities as a single activity (Reg. 1.469-9 election).

Make the aggregation election in writing. Without it, hours have to clear material participation per property.

Contemporaneous time log — date, activity, hours, address. Calendar entries. Email and text records. NOT a reconstructed spreadsheet built at tax time. This is the single most common failure point in audit.

Allowed: detailed daily logs, calendar evidence, third-party corroboration. Rejected: vague monthly estimates, post-hoc spreadsheets, hours claimed for passive 'investor' activities like reviewing financials.

750 hours is roughly 15 hours per week. Plausible activities: property acquisition, renovation oversight, tenant management, bookkeeping for the portfolio, market research, contractor management.