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Material participation is a term used in the IRS tax code to determine whether a taxpayer is actively involved in a business or rental activity. The IRS has established seven tests to determine if an individual meets the criteria for material participation. For most taxpayers, meeting any one of these tests qualifies them as materially participating. The most common tests related to hours spent in the activity are: 1. The individual participates in the activity for more than 500 hours during the tax year. 2. The individual's participation in the activity constitutes substantially all of the participation in that activity by all individuals (including non-owners) for the tax year. 3. The individual participates in the activity for more than 100 hours during the tax year, and no other individual participates more hours than the individual. There are additional tests that consider participation in previous years or participation in multiple activities. A detailed analysis may be required based on each taxpayer's specific circumstances to determine material participation.