Two thresholds, both required
More than 750 hours in real property trades or businesses, and more than 50% of your total working time across all jobs and businesses spent in those activities.
Source One Stays · Investor Guide
Real Estate Professional Status (REPS): what it actually requires
The two thresholds behind REPS, what happens after you qualify, and how it compares with the short-stay path.
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REPS is an IRS classification that lets a qualifying taxpayer treat rental real estate activity as nonpassive. To qualify, you need more than 750 hours in real property trades or businesses in the year, and more than half of your total personal working time has to be in those activities, and you still have to materially participate in the specific rental activity for its losses to be usable. It's a high bar for anyone with a demanding full-time job outside real estate.
Published by Source One Stays · Updated October 5, 2026
Key rules
What the rules say
Qualifying is step one
After qualifying for REPS, you still need to materially participate in each specific rental activity (or a properly grouped set of them) for its losses to count as nonpassive.
Hours can come from several real estate businesses
REPS hours can come from any real property trade or business you materially participate in, not only your own rentals. Development, construction, brokerage, property management and flipping can all count if the hours and participation are real.
Good to know
Common questions
Does a full-time W-2 job outside real estate rule this out?
Not automatically, but it's statistically very difficult, since a 2,000-hour W-2 job would require 2,001 or more additional hours in real estate to clear the 50% test in the same year.
Do my spouse's hours count?
Each spouse must individually meet the 750-hour and 50% tests to qualify for REPS, but once one spouse qualifies, both spouses' hours can combine for material participation across the rental activities.
Is REPS the only path to deduct STR losses against other income?
No. The short-stay exception covered in our STR loophole guide is a separate, often more achievable path for an owner whose primary rental activity is short-term stays.
No. The short-stay exception covered in our STR loophole guide is a separate, often more achievable path for an owner whose primary rental activity is short-term stays.
Sources: IRS Publication 925, Passive Activity and At-Risk Rules.
Related guides: The STR loophole and material participation · Cost segregation and bonus depreciation
This is general information, not tax or legal advice. Every situation is different, talk with your CPA about how this applies to you.
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