short-term rentals ate not passive if you provide significant services and thus they are reported on schedule C. if no significant services are provided then the rentals are passive and go on schedule E. if it produces net income then your prior suspended rental passive losses can be used to offset the income. Note that if you have net income properly reported on schedule C you'll owe self-employment taxes. Properly reporting on Schulele C means the activity is not passive so you can't use the suspended passive losses to offset the
According to the IRS, not all rental property activity should be reported on Schedule E. If the property owner provides “substantial services” to short-term renters, the IRS says that the rental activity should be reported on Schedule C, and that the property owner must pay self-employment taxes on the income. If there is a loss, it can be fully deducted without regard for the passive loss limitation rules. If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you
report your rental income and expenses on Schedule C. Substantial services don’t include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Also, you may have to pay self-employment tax on your rental income using Schedule SE. For a discussion of “substantial services,” see Real Estate Rents in chapter 5 of Pub. 334.
