Disclaimer: ArrivHQ does not provide tax, legal, or accounting advice. The information in this article is for educational purposes only and is not a substitute for professional guidance. Consult a qualified tax professional before making decisions based on your specific situation.

Overview

Real Estate Professional Status (REPS) is an IRS designation under IRC Section 469(c)(7) that allows qualifying taxpayers to treat rental real estate activities as non-passive. For short-term rental hosts, REPS can mean the difference between deducting rental losses against other income and having those losses suspended indefinitely under the passive activity rules. Qualifying requires meeting two annual hour-based tests and separately demonstrating material participation in each rental activity.

ArrivHQ helps you build the contemporaneous documentation needed to support a REPS claim. It does not determine whether you qualify — that is a decision for you and your tax professional.

How it works

The two REPS tests

To claim REPS for a given tax year, you must meet both of the following tests:

  1. 750-hour test — You spend more than 750 hours during the tax year performing services in real property trades or businesses in which you materially participate.
  2. More-than-half test — More than half of the personal services you perform during the tax year (across all trades or businesses) are in real property trades or businesses in which you materially participate.

Both tests look at your total hours across all qualifying real property activities — not just short-term rentals. Property management, development, construction, brokerage, and similar activities can count.

Why it matters for STR hosts

Without REPS, rental activities are generally classified as passive under IRS rules. Passive losses can only offset passive income. If your rental deductions (depreciation, repairs, mortgage interest, etc.) exceed your rental income, the excess loss is suspended and carried forward — it does not reduce your W-2, business, or investment income.

With REPS and material participation established, your rental activity is reclassified as non-passive. Losses become fully deductible against all income types in the year they occur, subject to other applicable limitations.

How ArrivHQ supports your documentation

ArrivHQ does not tell you whether you qualify for REPS. It gives you the organized records your CPA needs to make that determination:

  • Work logs — Each entry records the date, property, activity type, duration, and a description of what you did. Your running hour total is visible on the Today dashboard.
  • Expenses — Categorized and receipt-attached expenses demonstrate the scope and nature of your real property activities.
  • Mileage logs — Trips to properties with dates, origin, destination, distance, and purpose document time spent traveling for property management.
  • Revenue logs — Gross income by property and period shows the business context for your activities.

When you log a work entry, ArrivHQ timestamps it automatically. This produces the kind of contemporaneous record the IRS values during an examination — records created at or near the time of the activity rather than reconstructed later.

Married filing jointly

If you file a joint return, only one spouse needs to meet the REPS tests. However, you cannot combine hours between spouses to reach the 750-hour threshold — one spouse must independently satisfy both tests. The qualifying spouse should be the one logging hours in ArrivHQ.

Limits & requirements

  • Work logs, expenses, and mileage tracking are available on all paid plans (Comply at $19/mo, Host at $34/mo, Portfolio at $49/mo).
  • The 750-hour running total on the Today dashboard counts hours from work log entries for the current calendar year.
  • If you manage multiple properties and want to aggregate hours across all of them (common for the "grouping election"), the Portfolio plan supports multi-property tracking and cross-property reporting.
  • ArrivHQ does not track hours spent in non-rental real property activities (e.g., real estate brokerage). You may need to maintain separate logs for those activities and provide them to your CPA alongside your ArrivHQ exports.

FAQ

What counts toward the 750 hours? Hours spent in real property trades or businesses in which you materially participate. For STR hosts, this typically includes property management, cleaning, guest communication, maintenance, purchasing supplies, bookkeeping for the rental, and travel to the property. Your tax professional can advise on what qualifies for your situation.

Does ArrivHQ automatically tell me if I qualify for REPS? No. ArrivHQ shows your logged hours and organized records. Whether those hours satisfy the REPS tests depends on factors outside the platform — including your other employment, how you categorize activities, and whether you make a grouping election. Your CPA makes the final determination.

What is a grouping election? Under IRC Section 469, you can elect to treat all of your rental properties as a single activity for purposes of material participation. This is filed with your tax return. If you make this election, your combined hours across all properties count toward the material participation tests. Discuss this option with your tax professional.

Can both spouses count hours toward REPS on a joint return? No. Each spouse is evaluated independently. Only one spouse needs to qualify, but that spouse must meet both the 750-hour and more-than-half tests on their own.

What if I have a full-time W-2 job? The more-than-half test requires that the majority of your total personal services across all businesses are in real property. If you work 2,000 hours at a W-2 job, you would need more than 2,000 hours in qualifying real property activities to meet this test. This is a high bar. Discuss your specific situation with your tax advisor.

How far back should I keep records? The IRS generally has three years from your filing date to audit a return, but this extends to six years if income is underreported by more than 25%. Most tax professionals recommend keeping records for at least seven years. ArrivHQ retains your data for as long as your account is active.