Are You a Real Estate Professional?

Might seem like a silly question if you’re a real estate agent.  However, if you’ve got real estate investments, you really need to pay attention to whether or not the IRS thinks you’re a real estate professional.

If you haven’t heard about the tax issues coming up in California related to real estate professionals and investments, now would be a good time to get up to speed.

Evidently, there have been some audits in California where the IRS took the position that in order to be a real estate professional, you must be involved in “brokering” real estate transactions.  And, of course, only your broker does that according to the California IRS auditors.

Why is this important?  Well, because if you are a real estate professional, you can deduct any losses you experience on real estate investments from your income.  If you’re not, you can’t.

You May End Up Being Wrong!

While the fight in California is still ongoing, if the IRS definition used in those cases stands, it’s very likely that the IRS will increase its audits of real estate agents, especially if those agents own real estate investments.

Get more information and links to updates from this Realty Times article written by Diane Kennedy, a well-known tax strategist.