Property Aggregation – Writing Off Your Real Estate Passive Income!👈

Property Aggregation – Writing Off Your Real Estate Passive Income!👈

(mellow music) – [Toby Mathis] Property aggregation, what is it and why would I do it? You want to knock this one out? – [Man] Property
aggregation, this has to do with the participation
rules, material participation and active participation, saying basically that you have enough hours. The material participation rule says, the primary one’s that you have to have 750 hours in an activity. – [Toby] Material participation or the real estate professional? Material I think is 500,
not to mince words, but– – [Man] No, that’s fine. – [Toby] Yeah, so
you always have two things. You have, hey, I’m a
real estate professional and I’m going to, you
actually have to meet both the material participation and real estate professional
that’s 750 hour, with it being more than 50% of your, use of your working time. You have to meet all those,
and it’s per property unless you make an aggregation election. – [Jeff Webb] Or as they say, per activity. – [Toby] Per activity, yep. That’s a good way to put it. So if you’re going to be
real estate professionals, since we deal with a lot
of real estate investors, you have to make a property
aggregation election. Otherwise, you literally,
there’s actually a court case on this where you’d have to qualify and spend the time on each property. Now that court case screwed it up, ’cause they did 750 hours on one property, and I think it’s actually 500, but neither way, what you look at is, you have to meet the time test, and if you don’t want
to do it per property, you make an election to treat
’em all as one activity. – [Jeff] And the whole idea behind this is to convert from passive
income to non-passive income. The one problem you may run into is if you have a bunch of
passive losses built up, and then you aggregate the property. Normally when you sell property, you release all the
losses from that property. Once you aggregate all your properties, you can’t release any of those losses until you sell everything,
all the properties. – [Toby] Right,
it’s all one activity, so it’s one property as far
as the IRS is concerned. Alright, so why is it and
why would I want to do it? If you’re a real estate professional, you could write off the passive losses against your active income, ’cause it’s no longer passive. It’s deemed passive unless
you meet the exception, which is real estate professional status. So when does somebody use it? You use it when you’re a
real estate professional, is really what it boils down to. – [Jeff] And it can have a
substantial effect on income. – [Toby Mathis] Yep. (mellow music)

1 Comment

  1. Joel Cotton says:

    Shortest video ever, come on guys.

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