The Biggest Tax Mistake Real Estate Investors Make

Services for Real Estate Pros with Think Glink Media

It’s that taxing time of year, so break out your pencils and start sweating.

If you’re a real estate investor, it’s easy to run afoul of the complicated IRS tax laws. To start with, if you own investment real estate, you first have to figure out which category of real estate investor you fit into:

  • Active Real Estate Professionals make the decisions about buying, selling, and leasing their investment real estate. The IRS says active real estate professionals spend more than 50 percent of their work life actively engaged in the business of buying, selling and managing your properties, which has to amount to at least 750 hours per year.
  • Passive Real Estate Investors contribute money to the purchase or upkeep of the property but don’t participate in the day-to-day property management. Passive investors are limited to $25,000 in losses due to their real estate.

If you decide that you’re an active real estate professional, the IRS then asks you to make a choice between whether you’re a flipper or a long-term investor.

The IRS considers you to be a flipper if you buy and sell real estate properties frequently. What’s the magic number?

Read the full article here:;blog-river

As April 15 approaches, MoneyWatch is publishing daily tax tips. Please check back frequently for the latest advice from our experts.



Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Wallace S. Gibson, CPM 03/08/2010 02:54 AM
  2. Charles Stallions 03/10/2010 10:34 PM
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Steve, Joel & Steve A. Chain
Chain Real Estate Investments & Mortgage, Steve & Joel Chain - Cottonwood, CA


The IRS view of passive vs active investments is an important tax consideration. Expecially when considering  writing off passive income tax losses against active income gains.


My comments are no subsitute for the advice of your legal and tax professional.

Mar 07, 2010 02:22 PM #1
Ilyce Glink
Think Glink Media - Chicago, IL
Best-selling author, award-winning TV/radio host.

Hi Steve, thanks for your comment. Passive vs. Active is indeed very important to the IRS and beginning investors, especially, need to be careful.

Mar 17, 2010 12:31 PM #2
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