
REP Status
Real Estate Professional (REP) Status for Spouses
Real Estate Professional (REP) status can be a useful approach for families looking to lower their household income taxes while building long-term equity in real estate. When one spouse has steady earned income, and the other spouse can dedicate time to real estate, the IRS may allow the couple to offset a large portion of that salary with real estate losses. In short, the spouse who qualifies as a “Real Estate Professional” opens the door to significant tax benefits that might otherwise be out of reach.
Why REP Status Is So Valuable
In most cases, passive losses from real estate can only offset passive income. That means you can’t typically use rental property losses (often from depreciation) to reduce the taxes on your family’s salary or business income. However, if you meet the IRS criteria for Real Estate Professional status—by spending enough hours and actively participating—those losses can become “non-passive,” making it easier to reduce or even wipe out taxes on your spouse’s active income. It’s a powerful tool for households with one earner and one spouse who can commit to real estate at around half-time.
Example
Let’s say your family’s taxable salary income is $150,000 after deductions. Meanwhile, the spouse pursuing REP status manages a small portfolio of rental properties that collectively show $30,000 in paper losses (largely from depreciation and certain deductible expenses). Normally, those rental losses would be “passive” and might not offset your salary. But as a Real Estate Professional, that $30,000 can be applied directly against your family’s $150,000 salary income.
Before REP: You’d pay taxes on $150,000 in salary, missing out on the real estate losses.
After REP: You can offset $30,000 of the salary with real estate losses, paying taxes on only $120,000.
If you’re in a 25% tax bracket, that’s a potential savings of $7,500 in just one year. Over time, those savings add up, especially as you grow your real estate portfolio.
Qualifying for REP
Under IRS rules, you must typically:
Spend at least 750 hours per year on real estate-related tasks, such as property management, tenant relations, or acquisitions.
Materially participate in those properties—meaning you’re involved in daily or regular operations, not just delegating everything to a third party.
Prove real estate is your primary professional focus, especially if you’re not employed full-time elsewhere.
For couples where one spouse has few (or no) W-2 earnings, meeting these requirements can be relatively straightforward—real estate is simply their main job.
Things to Consider
Pursuing REP status demands consistent record-keeping and careful scheduling. You’ll want to track every hour you spend on real estate activities and maintain documents that verify your involvement, such as emails, property management logs, or renovation receipts. While this takes effort, it also instills discipline in running your real estate portfolio—an approach that often results in more efficient operations and better returns.
How a Cooperative Approach Can Help
Our cooperative model is designed to support members who aim for REP status. Because we pool funds and share responsibilities, it’s easier to find meaningful tasks that contribute to your required hours—such as renovation oversight, tenant management, and property scouting. You’re also part of a network that can offer mentorship, resources, and assistance if you need to demonstrate “material participation.”
By leveraging the cooperative’s collective structure, you gain access to multiple properties and a steady stream of active tasks, which can bolster your REP claim. Meanwhile, you benefit from the reduced financial risk of investing alongside others, making it less daunting to build a real estate portfolio.