If your rental property is treated as a business and reported on Schedule C (Self-Employment), then your loss is not subject to the income limitations and phase out applied to rental property reported on Schedule E. Also, if your rental is reported on Schedule C and has a profit, you will are subject to self-employment tax.
IRS section 469 defines six exceptions to what counts as rental activity. Those exceptions include:
- The average stay lasts seven days or less.
- The average stay is 30 days or less, and the owner provides services equivalent to those offered by a hotel, such as daily housekeeping, meal services, and transportation.
- Owners provide “extraordinary personal services” to renters. Think luxury rentals that include a personal chef or private tours.
There are differing opinions about what is required to report a short term rental property as a business on Schedule C. One view is that you only have to have to have average stays of six days or less. Others say in addition to average stay of six days or less, you have to provide substantial services.
If you want to report your rental on Schedule C, you will have to delete your "rental" and start a business in TurboTax.
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