Time Log
Welcome to our material participation time log. Track hours to support IRS material participation tests.
IRS Material Participation Tests IRC §469 / T Reg. §1.469-5T
| Test | Requirement |
|---|---|
| Test 1 | 500+ hours in the activity during the tax year |
| Test 2 | Substantially all participation — taxpayer's is the only significant participation |
| Test 3 | 100+ hours AND more hours than any other individual |
| Test 4 | Significant participation activity (100–500 hrs) — aggregate SPAs exceed 500 hrs |
| Test 5 | Material participant in any 5 of the prior 10 tax years |
| Test 6 | Personal service activity — material participant in any 3 prior years |
| Test 7 | Facts & circumstances — 100+ hours, no one else more involved |
This log is a recordkeeping tool only. Consult your tax advisor to determine which test(s) apply. Contemporaneous records are strongly recommended by the IRS.
Below is an example list of activities that count, and do not count, toward real estate professional and material participation hours. Please consult a tax advisor before implementing.
Any time spent in a real property trade or business (development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage).
You must be "providing services" to count the time. Simply being "on call" will not count (Moss v. Commissioner, 135 TC 365). Research and education hours also do not count.
- Showing the property for rental
- Taking tenant applications
- Screening tenants (credit reports, references)
- Preparing and negotiating leases
- Cleaning and preparing units for rent
- Doing repairs yourself
- Doing or arranging improvements
- Hiring and supervising a resident manager
- Purchasing supplies and materials
- Inspecting the property
- Responding to tenant complaints and inquiries
- Collecting and depositing rents
- Evicting tenants
- Writing and placing advertisements
- Creating and maintaining a rental website
- Attending landlord association meetings
- Educational seminars on managing rental property
- Traveling for any of the above activities
- Education hours not spent learning how to make the property "go"
- Research time
- Reviewing financial reports or a property manager's monthly statement
- Time spent acting as an employee where you own less than 5% of the employer
Disclaimer: This tool is meant for informational purposes only, and should not be construed as tax, legal, financial, or other advice. By using this tool, you agree to hold The Real Estate CPA (Hall CPA PLLC), its officers, staff, and affiliates harmless from and against all losses, costs, liabilities, claims, damages, and expenses of every kind and character resulting from or related to using this tool. IRS Circular 230 Disclosure: This tool and any attachments are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.