Yes, a husband and wife can combine their time working on real estate to meet both the 500 material participation requirement and the 750 hours to meet the REPS requirement. This is because the IRS considers spouses to be one taxpayer for purposes of the material participation and REPS tests.
To meet the 500 material participation requirement, a taxpayer must participate in the real estate business for more than 500 hours during the year. The hours that a spouse spends working in the real estate business can be counted towards the 500 hour requirement, even if the spouse is not a licensed real estate agent.
To meet the 750 hours to meet the REPS requirement, a taxpayer must participate in the real estate business for more than 750 hours during the year and must also meet the 51% test. The 51% test requires that the taxpayer’s participation in the real estate business be more than 51% of the total participation in the business by all individuals who participate in the business.
If a husband and wife both work in the real estate business, they can combine their hours to meet both the 500 hour and 750 hour requirements. For example, if the husband works 600 hours in the real estate business and the wife works 150 hours, they would meet the 500 hour requirement and the 750 hour requirement.
It is important to note that the IRS does have some restrictions on how spouses can combine their time working in the real estate business. For example, the spouses cannot just divide up the hours and each claim that they worked 500 hours. The IRS will look at the spouses’ actual activities in the real estate business to determine whether they have met the material participation and REPS requirements.
If you are married and are considering working in the real estate business, it is important to speak with a tax advisor to discuss how you can combine your time working in the business to meet the material participation and REPS requirements.