1040-SR (Desktop) | How to Designate Real Estate Professional/Non-Passive Income on Schedule E

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Last updated: Feb 14, 2024
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Rental activities are considered passive activities, however, real estate activities aren't treated as passive activities; they're rather treated as non-passive. Taxpayers qualify as real estate professionals if:

1- More than half of the personal services the taxpayer performed in all trades or businesses during the year were performed in real property trades or businesses in which the taxpayer materially participaited.
2- They performed more than 750 hours of service during the tax year in real property trades or businesses in which the taxpayer materially participated.

 

To designate the taxpayer as a real estate professional, follow the steps below:

  1. From the Main Menu of the tax return, go to Income

     

  2. Go to Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)

     

  3. Choose Rents and Royalties

     

  4. Click New

5. Select the property type from the list and fill in the information

6. Select Supplemental Income Questions

7. Disposed of Property or Eligible Real Estate Professional > Change to YES

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