How to Avoid Obamacare Tax: Become a real estate professional

Real Estate Agent with BANCROFT REALTY LLC 0637667

 Avoid Obamacare Tax: Another reason to be a real estate professional

Avoid the Obamacare tax and save 3.8%.  This strategy has a huge impact on your bottom line.  In my article How to claim Passive Loss Limitation Exemption on being exempt from the $25,000 passive loss limitation, I detailed the process on how to qualify as a real estate professional.  The Obamacare tax gives you another incentive to become a real estate professional in the eyes of the IRS.  Find out how.

Obamacare Tax Safe Harbor

The tax code provides a safe harbor for those who qualify as a real estate professional.  The entrance requirements into the harbor are as follows:

  • You must qualify as a real estate professional, and
  • You must participate 500 hours per year in real estate activities

Being a real estate agent or just owning rental properties is not enough to qualify as a real estate professional.  See How to claim Passive Loss Limitation Exemption on how to qualify as a real estate professional.

Real Estate Business Avoid Obamacare Tax

Here is some more good news.  Real estate professionals who qualified for the above criteria in five of the last ten years are considered to be in a real estate business.  That means profits from your rental real estate business is EXEMPT from the Obamacare Tax.  How about some more good news?  When your sell your property, profit from the sale is also avoid the Obamacare Tax.  Now this is a harbor you definitely want to chart a course to.

More tax advantages for Real Estate Business

Business income is exempt from the Obamacare Tax.  Your business has other tax advantages that are discussed elsewhere.

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Comments (5)

Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

I am so happy you commented on my blog today and i stopped by to check out your blog. I cant wait to read the links and learn more about this. It will be a great help Jody Wall 

Sep 22, 2016 11:05 PM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

I attended a seminar earlier this year on this very thing. We do have some benefits and need to use them Jody.

Sep 23, 2016 09:59 AM
David Mixon
Loans 4 Investors - Mid Cities, TX

This is the best option to relieve yourself from Tax and by doing so, you save yourself a good amount of money. This is a trending topic right now and i have also read many articles on the same. Thank you for the wonderful information Jody Wall.

Sep 28, 2016 08:30 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I think the law is going to change and worth it to whatever needs to be eventually

Sep 30, 2016 04:51 PM

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