MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

Don't Fail the IRS 100-Hour Test

27 Apr 2026 · 1 min

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In this segment, Mark Kohler explains the IRS material participation rules, focusing on the 100‑hour test, which is the easiest of the seven qualifying tests. He clarifies that a taxpayer (and their spouse) must log at least 100 hours of work on a rental property and must have spent more time than any other individual involved. Kohler stresses meticulous record‑keeping of both personal hours and the hours contributed by third‑party helpers such as cleaners, handymen, contractors, landscapers, and other service providers. He warns that many taxpayers fail to demonstrate that they exceed the hours of any other person, which can jeopardize the qualification.

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There's actually 7 tests or 7 ways you can qualify for material participation. The easiest is test number 3, and it's this 100-hour rule, which says as long as you put in 100 hours and more than anyone else on the property, typically again in the first year, then you have qualified with material participation. Let's break it down further. And what's cool is that if you're married, both you and your spouse's time counts for that 100 hours. So you're going to keep a good list of all the things you're doing to get to the 100 hours, and you're going to keep track of anybody else that helps with the property. Cleaners, once you go online, handymen, contractors, anyone else that shows up at the property, you're going to write it down and say, oh, so-and-so the landscaper came in and put in 2 hours, or so-and-so put in 4 hours, or the hot tub people came, whatever. You're going to keep a record of the people that come to the property and your time. See, that's a mistake a lot of people make, because remember, you got to show you put in 100 hours and more than any other one person.