Quitting a Job to Pursue Real Estate
Through years of experience working with real estate investors and agents, I’ve advised a lot of people as they made the transition from a corporate job to pursuing real estate full-time. In addition to the typical questions about LLCs and other concerns, there are a lot of questions about how to approach it from a tax perspective.
The tax code has many legal loopholes. One such loophole revolves around real estate professional status. This is a very powerful election you can make on your tax return to supercharge depreciation and other paper losses, in order to offset the income you earn.
In order to qualify, you need to show the following:
- You spend more than half of your time in real property trades or businesses;
- You spend more than 750 hours per year pursuing real property trades or businesses in which you materially participate.
These qualifications require a little bit of unpacking, but suffice it to say that real estate needs to be your primary job, and you need to keep detailed and careful records of how you’re spending your time. If you can show that you qualify for real estate professional status, you can take advantage of this very powerful tax election and reap immediate tax benefits to help ease your transition from your current job to pursuing a career in real estate, full-time.
Thinking about taking the plunge? Congratulations! But first, I recommend speaking with a tax expert who has experience in this area of the tax code. If you’re looking for a team who can help, please don’t hesitate to reach out to us at Fusion Legal & Tax. We’d love to help you navigate this exciting but sometimes tricky transition to your best tax advantage. Cheers to bright futures and bigger profits!