You are here:

Tax Law (Questions About Taxes)/Tax deduction of Vacation rental home


I own a vacation rental home in Hawaii. I am a full time real estate agent in Virginia. For the last 5 years I have been taking a passive deduction on my expenses of my vacation rental home. As a full time agent or part time agent, can I take an active deduction for this property? Property values have declined so greatly in Hawaii that I doubt that I will ever recover my losses.

Thank you.


Thanks for your question.

In order to qualify as a real estate professional and treat the Hawaii home as an active income/loss you must meet the material participation hurdle.  This requires that you spend at least 750 hours during the year on rental activities.  You would also have to file an election with the IRS in which you treat all your rental activities as a single rental activity.  

"A real-estate professional cannot group rental properties together to determine “material participation” in rental for a taxable year unless he elects to treat all rental properties as a single rental activity by filing a statement with his original income tax return for the taxable year. I.R.C. § 469(c)(7)(A) & Treas. Reg. § 1.469-9(g)(3). Merely aggregating rental income and expenses on Schedule E does not suffice. The Tax Court in Trask, supra held that the taxpayer was a real-estate professional, but his failure to file an election caused him to fail the material participation test for rental. Without an election, the taxpayer must examine each rental property to determine whether he materially participated in the rental of that property."

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

All Answers

Answers by Expert:

Ask Experts


John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

©2016 All rights reserved.