How do you determine if rental income is considered passive or active for tax purposes?

ANSWER

The BIDaWIZ Team's Answer:

Whether rental income is viewed as passive or active depends on if the owner is actively managing the property. If you meet the requirements of a real estate professional as detailed in IRS Publication 527, you would complete Schedule C and prepare a separate Schedule SE. The requirements to be considered a real estate professional are: 1) more than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate and 2) You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. This is all defined in IRC Section 469.