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Material Participation Time Summary

PostedMay 26, 2025

material participation timeBy Jason Watson, CPA
Posted Sunday, May 25, 2025

We chopped a lot of wood as they say. Here are some takeaways-

  • Investor and research times does not count. Travel time might count depending on your facts. Acquisition time might count if you complete the purchase (convert investor hours to acquisition hours).
  • You can group your real estate trades or businesses together to achieve the 750 hours test for real estate professional. This time cannot be split between spouses, however.
  • Short-term rentals with average guest stays of 7 days or less cannot contribute to the 750 hours test since they are not deemed rental activities. This can be good or bad.
  • While some Tax Court cases have synthesized material participation by the shear breadth of a real estate investor’s gaggle of rentals, a time log is the best option. It must be credible and reasonable, and corroborated with other evidence.
  • You might need to aggregate your rental properties into one activity to reduce the material participation hurdle for each rental. However, this formal election under Treasury Regulations 1.469-9(g) has significant downsides and cannot be easily revoked. See our Regulations 1.469-9(g) election section for more information.

Jason Watson, CPA, is a partner and the CEO of WCG CPAs & Advisors, a boutique yet progressive tax, accounting and rental property consultation firm with over 80 team members headquartered in Colorado serving real estate investors worldwide.

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I Just Got A Rental, What Do I Do? 2025 Edition

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Please use the form below to tell us a little about yourself, and what you have going on with your investments and wealth-building objectives. WCG CPAs & Advisors are real estate CPAs, tax strategists and rental property consultants, and we look forward to talking to you!

The tax advisors, business consultants and rental property experts at WCG CPAs & Advisors are not salespeople; we are not putting lipstick on a pig expecting you to love it. Our job remains being professionally detached, giving you information and letting you decide within our ethical guidelines and your risk profiles.

We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. As Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea. In other words, let’s not automatically convert “you can” into “you must.”

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