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How Can Physicians Use Real Estate Professional Status to Save?

February 15, 2022
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For doctors, dentists, and other high-earning medical professionals, there are not very many advantages when it comes to tax savings. Many common tax deductions, such as student loan payments or medical expenses, are phased out when an income reaches a certain bracket—meaning tax advantages for physicians are few and far between.

However, finding creative ways to help medical professionals save is one of our passions, so today, we are going to discuss Real Estate Professional Status (REPS). REPS is a tax benefit that often gets overlooked, but can be a smart tool medical professionals can use to save on their tax bill each year. Read on to learn all about it!

What is Real Estate Professional Status?

REPS is a designation you can claim on your taxes if you are a real estate professional—that is, if real estate is your primary job or you spend more than 750 hours on it annually. Once you qualify for this, any passive income you were making from your real estate business becomes active income, and as such, any passive losses become active losses that can reduce the amount of taxes you are required to pay each year. 

How Can I Qualify for Real Estate Professional Status as a Physician?

If you are planning to qualify for real estate professional status while actively working as a physician, you will need to allocate more hours annually to the management of your real estate properties than you do to your clinical work—which may seem daunting if you are working the 50 to 60 hour weeks typical of most doctors.

However, if you are married and planning to file your taxes jointly, having your spouse become a Real Estate Professional can ensure you qualify for the tax benefits of REPS without you having to cut back on the hours you spend on your primary profession. 

How Does Real Estate Professional Status Help Me Save on Taxes?

If you (or your spouse) are interested in using REPS for tax benefits, you are likely wondering just how it works. To get tax savings, you have to be able to show that you have real estate losses for the year. This may not sound like a good thing, but because real estate is such a unique industry, it is possible to have net losses on properties while still generating positive cash flow from rental units.

While this probably seems like a daunting undertaking, with careful planning, you can create big savings for yourself. Working with a financial professional from the get-go is one of the best way to help ensure that you are getting the best tax benefit possible from claiming REPS without sacrificing your steady income from working in the medical field.

If you’re interested in learning more about how to plan out your finances and save each month, we are here to help! We specialize in helping medical professionals make smart money decisions—contact us today to learn more.

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.