If I claim to be a real estate professional for tax purposes, is my income subject to FICA?
capn bob asked:
I qualify as a real estate professional for tax purposes. I own and manage over 25 rental properties. I have not claimed that status in the past. I have recently married and my husband has retirement and investment income in excess of the maximum income amount allowed under the passive activity rules. If I make a profit from my investments, am I subject to FICA taxes on that income? Is there a downside to claiming real estate professional status?
Willard
I qualify as a real estate professional for tax purposes. I own and manage over 25 rental properties. I have not claimed that status in the past. I have recently married and my husband has retirement and investment income in excess of the maximum income amount allowed under the passive activity rules. If I make a profit from my investments, am I subject to FICA taxes on that income? Is there a downside to claiming real estate professional status?
Willard
November 7th, 2008 at 7:27 pm
First, be sure you really meet the definition of a real estate professional. See IRS link below. If you don’t meet this requirement then claiming to be a RE Professional could be tax evasion.
Beyond that, if the income is rental income, or capital gains, the answer is no. If the income is active income (i.e. commissions, hourly fees) then it may be subject to self-employment (FICA) taxes.