Desktop - Where Do I Designate Real Estate Professional / Non-Passive Income on Schedule E?

By definition, Rental activities are passive activities. Real estate professionals’ activities are however not considered passive activities. They are considered non-passive.

A taxpayer must meet the following requirements to be considered a real estate professional:

If more than half of the personal services they performed in all dealings or businesses within the year were done in real property and that in these dealings, they significantly participated
They spent in excess of 750 hours of services within the tax year in real property trades.

To identify the taxpayer as a real estate professional:

Go to the main menu of the tax return (Form 1040)
From the menu select Income
Proceed to Rents, Royalties, Entities (Schedule E, K-1, 4835, 8582)
Under Rents and Royalties, from the list, choose the property
Select Supplemental Income Questions
For the field, “Disposed of Property or Eligible Real Estate Professional” - change to Yes.

Additional Information:

Publication 527, Residential Rental Property

Publication 925 - Passive Activity & At-Risk Rules

Instructions for Form 8582 - Passive Activity Loss Limitations