Are you on pace for REPS?

REPS means real estate professional status. It is a tax status. Without it, rental income and losses are passive by default, even if you work on the rentals. See Publication 925.

With it, rental losses can count as nonpassive, as long as you also materially participated in the rentals. The IRS sets two tests. You must meet both.

• More than 750 hours of services in real property trades or businesses where you materially participated.
• More than half of all your working time in those trades or businesses.

One spouse must meet both tests alone. On a joint return, you do not count your spouse's services for these two tests. See Publication 925 and Armanino.

A full-time W-2 job makes the half test very hard. Employee work in real property counts only if you own more than 5% of the employer. See Armanino and Publication 925.

Two court losses came partly from a missing grouping or aggregation election: Iovine and Mirch. Ask your CPA whether an election fits your rentals. See the WCG case list.

Material participation is a separate idea. It asks how involved you were in each activity. There are seven tests, and you need to meet only one. See the regulation. Three come up most for landlords and hosts.

• 500 hours. You did more than 500 hours in the activity during the year.
• Substantially all. Your work was substantially all the work done by everyone, including people who own no part of it.
• 100 hours and the most. You did more than 100 hours, and your hours were no less than any other person's.

For material participation, your spouse's hours count with yours. This holds whether or not you file a joint return. See the regulation.

This is where REPS and material participation differ. For REPS, one spouse must meet the 750 and half tests alone. For material participation, spouses combine.

Most rentals are passive. The short-term rental route works differently. If the average customer stay is 7 days or less, the property is not a rental for passive loss purposes. See Beancount.

You find the average this way: divide total nights rented in the year by the number of separate guest stays. The result must be 7 or less. See Beancount.

• Test each property on its own. You cannot blend the averages unless you make a formal election to group them.
• One long booking can push the average above 7 days.
• Keep booking records: each stay, with check-in and check-out dates.
• A parallel 30-day rule exists for owners who give significant personal services. Ask your CPA about it.

Once the property is not a rental, you only need to meet a material participation test. The 100-hour test is the one most hosts aim for. It is also the one reviewers check most closely. See Beancount.

Your hours must be no less than anyone else's. That includes cleaners, co-hosts and managers. Hosts often have no good record of those hours. See BiggerPockets.

You do not need a perfect system. You need a record that looks real. A CPA looks for entries made as the work happens, other people's time recorded, and totals that make sense. See WCG CPAs.

Each entry should show these things.

• The date, and when you wrote the entry.
• The property.
• What you did, in plain words.
• How long it took, in real time spent.
• Who did it: you, your spouse, a cleaner or a manager.
• Something that backs it up, such as a calendar event, a receipt or a message.

The IRS says an appointment book or calendar can show your hours. See Publication 925. Your records should also agree with the rest of your tax return.

Why logs lose in court

Courts do not reject logs for being plain. They reject them when they look rebuilt, vague, padded or in conflict with other records. These summaries come from tax-practitioner write-ups, not the court opinions. See the WCG case list, Mirch and Pourmirzaie.

• Moss (2010)LostOn-call hours do not count. Only work actually done counts.
• Mirch (2025)LostThe log had no dates and used fixed blocks. It gave 7 hours per turnover and 8 hours per rented night on call. The court allowed none of the 744.5 on-call hours. The cleaning hours also clashed with cleaning fees the owners deducted.
• Manalo (2012)LostThe log was rebuilt at the last minute, with nothing to back it up.
• Kutney (2012) and Lee (2006)LostEstimates made after the fact, called a “ballpark guesstimate”, were not enough.
• Pourmirzaie (2018)LostThe log said “every Saturday at the rentals”. Card statements showed purchases elsewhere.
• Escalante (2015) and Lucero (2020)Hours doubtedHundreds of hours for writing checks and reading statements did not look real. Neither did long times for small tasks, mixed with personal shopping.
• Pohoski (1998)LostThere was no record of the property manager's hours, so the comparison failed.
• Miller (2011)WonLogs made at the time, plus witness testimony.
• Leyh (2015)WonShe left travel time out of her log. The court let her restate it.

The pattern is clear. Rebuilt late, vague, on-call time and padded blocks lose. Same-day entries with real task times hold up better.

Only work that counts as participation goes in your hours. The regulation treats investor-type work as not counting, unless you are directly involved in day-to-day management or operations. See the regulation.

Does not count

• Studying and reviewing financial statements or reports on operations.
• Preparing summaries or analyses of the finances for your own use.
• Monitoring the finances or operations in a non-managerial role.
• Education time. See NATP.
• On-call time. See Moss.
• Personal errands mixed in with rental tasks. See Lucero.

Counts

• Work in the day-to-day running of the rental, done by you.
• Your spouse's work, for material participation only. It does not count toward the REPS tests.

Gray area: travel

Travel is a close call. Leyh won after adding travel time. Truskowsky lost because home-to-rental travel was treated as commuting. Ask your CPA how to treat it. See the WCG case list.

Dormer is an iPhone app that keeps your rental hours. It is free for one rental. It is made by Altai Ventures, the publisher of this site. See the Dormer page.

• Log hours by voice, typing or a timer.
• See your count toward 100, 500 and 750 hours, and your pace to Dec 31.
• Keep separate counts for you and your spouse, and for each rental.
• Find rental work in your calendar. Nothing counts until you confirm it.
• No sign-in. Records sync through your own iCloud.

Dormer does not read your bookings, so it cannot work out your average stay for you. Dormer keeps records. It does not give tax advice and cannot tell you whether you meet a test.

Get Dormer on the App Store

The calculator turns your target into a weekly pace. All math runs in your browser. Nothing is sent or stored.

• Hours needed = target minus hours so far.
• Weeks left = days from today to the year end, divided by 7, rounded up, minimum 1.
• Hours a week = hours needed ÷ weeks left.
• More than half (750 target only) = your rental hours ÷ your total working hours. It must be above 50%.

The tests say “more than” each mark, so aim a few hours past it. It is an estimate, not tax advice. See Publication 925 and the regulation.

Every fact above comes from one of these. Court case notes come from the practitioner write-ups, not the opinions themselves.

• Treas. Reg. §1.469-5T, Cornell LII
• IRS Publication 925
• Armanino: passive activity loss rules and the real estate professional exception
• NATP: real estate professional status and the IRS tests
• WCG CPAs: Tax Court cases on real estate professional status
• Current Federal Tax Developments: Mirch v. Commissioner
• WCG CPAs: what a CPA asks for in an hours log
• BiggerPockets: counting cleaners' and co-hosts' hours
• Beancount: the short-term rental loophole and the seven-day rule

This is general information, not tax advice. Talk to your CPA.