For tax purposes, the IRS classifies those who invest, or work in real estate into four distinct and separate classifications. The tax laws for real estate investors won’t work for dealers, developers, or agents. The same tax laws that for other professionals do not always work for those that look to profit from real estate transactions. Investors need to know where to maximize tax savings and minimize tax liabilities.

According to the IRS, a real estate investor is someone who passively invests in real estate for long-term periods; that is, longer than one year. Any type of real estate investment can occur, single family homes, condos, industrial parks, undeveloped land and many other types. There can be properties involved in rent-to-own programs. The properties can have a sitting tenant and/or there can be an ongoing purchase option.

To be categorized as a real estate professional, there needs to be 5% or more ownership of a real estate business, or a minimum of 750 hours per year working exclusively on real estate activities, or more time on real estate activities spent than anything else while still meeting the 750 hours per year rule.

Other provisions apply, to find out more click here.

Hunting for the perfect home in Grand Orchid, Boca Raton FL? Realtor® Caesar Parisi is ready to help you buy your dream property.

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