Real estate professional status: the 750-hour test and how to document your hours

The two tests

Rental activities are generally passive even if you work hard at them. IRS Publication 925 says that if you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive, so losses can be used against other income. You qualify only if you meet both of these in the same tax year.

1. More than half of the personal services you performed in all trades or businesses were in real property trades or businesses in which you materially participated.
2. You performed more than 750 hours of services during the year in those real property trades or businesses.

The first test is the one that stops most people with full-time jobs. If you work 2,000 hours a year as an employee in another field, you would need more than 2,000 hours in real estate to pass.

What counts as a real property trade or business

Publication 925 lists the activities: developing, redeveloping, constructing, reconstructing, acquiring, converting, renting or leasing, operating or managing, and brokering real property. Time spent as an investor, such as reading about markets or reviewing financials in the way an investor would, is a harder case to defend, so your preparer should weigh it.

Do not count work you did as an employee in a real property business unless you owned more than 5% of the employer. Time spent by your spouse does not count toward your 750 hours or your more-than-half test, though on a joint return a spouse's participation can count when deciding if you materially participated in an activity.

Material participation, which is a separate hurdle

Qualifying as a professional is not enough. Your rentals are non-passive only if you materially participated in them. Each rental is a separate activity unless you elect to treat all your rental real estate as one activity. Publication 925 lists the tests, and meeting any one is enough. The ones most landlords use:

• You participated more than 500 hours in the activity during the year.
• Your participation was substantially all of the participation by everyone, including non-owners.
• You participated more than 100 hours and at least as much as anyone else, including non-owners.
• Based on all the facts, you participated on a regular, continuous and substantial basis.

The election to treat all rental real estate as one activity is made on your return, and it can make the 500-hour test much easier with several properties. It has consequences for later years, so decide it with your tax preparer.

Example a made-up owner has four rental houses. Treated as four activities, she works 160 hours on each. She passes the 100-hour test only if her 160 hours are at least as many as anyone else's, and her 640 total hours do not meet the 500-hour test property by property. If she elects to treat the four as one activity, the 640 hours count together and exceed 500.

A worked pass and a worked fail

Example a made-up owner works 1,500 hours as a salaried engineer and 900 hours managing her own rentals. Her real estate hours are above 750, but 900 is less than half of the 2,400 total hours. She does not qualify.

Example a made-up owner left his job in March and logged 1,000 hours on his rentals and 800 hours on other work. Total 1,800 hours; 1,000 is more than half (900) and more than 750. He passes both tests, and then still has to show material participation in his rentals.

How to document your hours

The IRS says you can use any reasonable method to prove your participation, and you do not have to keep contemporaneous daily time reports. An appointment book, a calendar or a narrative summary of services and approximate hours can work. In an audit, hours claimed with nothing behind them are the weak point, so build the record while you work.

• Keep a simple log with date, property, task and hours, filled in the same week.
• Keep calendar entries for showings, inspections, vendor visits and tenant meetings.
• Keep emails and texts that show you making management decisions.
• Keep work orders, invoices and vendor messages that show when you handled a job.
• Keep a record of your other job's hours, because the more-than-half test compares the two.

Records should be kept as long as the return is open. See how long to keep rental property records.

How DoorKeeping handles it

DoorKeeping does not track your personal hours, so keep your own log or calendar. What it does keep is a dated record of the work around each property: work orders, vendor job links, lease and renewal approvals and tenant emails, all in one place per property, which can back up a calendar entry. Each property has its own books, so you can show what each rental earned and spent. DoorKeeping gives no tax advice, so your preparer decides whether you qualify.

Sources

1. IRS, Publication 925, Passive Activity and At-Risk Rules (2025), read Oct 30, 2026

Questions

How many hours do I need to be a real estate professional?

More than 750 hours in real property trades or businesses in which you materially participate, and those hours must be more than half of all the personal services you performed in all your trades or businesses that year.

Can I be a real estate professional and also work a full-time job?

It is hard, because your real estate hours must be more than half of your total working hours. Employee work in real property counts only if you own more than 5% of the employer.

Do I need a daily time log?

No. Publication 925 accepts any reasonable method, such as a calendar, appointment book or a narrative summary with approximate hours, but a log kept as you go is the easiest to defend.