I am trying to understand the tax treatment of a short-term rental that I own through a SMLLC (that is taxed as sole proprietorship) but is managed by a property manager. Specifically:
1. Would this be considered as passive income or active income? my guess is passsive
2. Would this be reported on Schedule E or Schedule C? my guess is Schedule E
3. On this page, they consider this scenario (a short-term rental combined with non-material participation) as a best option and say that is eligible for pass-thru losses and cost-segregation options. What do they mean by pass-through losses in this context? I understand that losses from passive income cannot be used to offset income from active sources such as W2.
4. Does Schedule E have a line where it allows me to deduct expenses paid to the property management company for management of the property?
5. I understand that putting yourself in the active income category is good when you are operating at a loss whereas passive income is desirable when you are operating at a profit so you don't have to pay self-employment tax. correct?
References:
https://anderscpa.com/tax-considerations-for-short-term-rental-property-owners/?tag=re&c
