Rentals are businesses. What tax form you use depends on the "substantial services" performed.
- If you perform substantial services, use Schedule C.
- If you just own the condo and you rent it out, rental income and expenses are reported on Schedule E.
According to the IRS: "Generally, Schedule C is used when you provide substantial services [i.e. hotel like services] in conjunction with the property or the rental is part of a trade or business as a real estate dealer."
- Substantial services are defined by the IRS as: regular cleaning, changing linens, or maid services…furnishing of utilities or cleaning of public areas do not count as substantial services.
- For example, if you rent out a room in your house on Airbnb to short-term renters, the “substantial service” requirement can be satisfied if you are cleaning and changing linens after each short-term renter has left. This rule can apply to an entire property, or to a single room in a house.
- See IRS Publication 527, Chapter 3, page 12.
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