When you say they are converted to Schedule E, what do you mean by that? How to report is not a choice, it is based on average days of rental and substantial services. Did the average rental days increase to over 7?
Short term vacation rentals are generally considered Schedule C income.
If the property is rented an average of 7 days or less it is not considered rental activities and therefore is not reported on Schedule E, but instead it is reported on Schedule C.
Additionally, if you provide Substantial services, it is NOT considered rental income, instead it is considered self-employment income.
If you do not provide substantial services and the average rental days are more than 7 days, then the income is reported on Schedule E.
Your activity isn’t a rental activity if any of the following apply.
The average period of customer use of the property is 7 days or less. You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. The activity's average period of customer use will equal the sum of the amounts for each class. Pub925
The instructions for Schedule E state, "Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs."
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