Rental loss incorrectly applied?

[bjg_enterprises]

I have a mixed-use primary residence that I rented out via Airbnb in 2025. I lived in the property for 182 days and rented it for 73 nights, which I have entered correctly in the rental property section. The property type is set to "Vacation or short-term."

Based on these personal use days, I believe the vacation home rules should apply (IRC §280A), which limits rental deductions to rental income and disallows any rental loss. However, my return is currently showing a rental loss of -$1,267 being applied against my total income.

My MAGI is also above the $150,000 threshold where the $25,000 active participant special allowance is fully phased out — so the loss should not be allowed under either set of rules.

Can you help me confirm whether the vacation home expense limitation is being correctly applied, or if there is a bug causing the rental loss to flow through incorrectly?

[Hi Palms]

In Forms view, scroll down on your schedule e worksheet to expenses. Expenses attributable to the rental periods are fully deductible, which includes expenses like management fees, commissions, and advertising.

[DaveF1006]

Try changing the "Property Type" from "Vacation/Short-Term" to "Single Family Residence" just to see if the loss disappears. If it does, you've found the solution.

If you change the software to "Single Family Residence," it will simply put a "1" on that line instead of a "3." Given that your property is a single-family home that you happen to rent out short-term, Code 1 is not "wrong"—it’s just less specific, but it does comply with the IRC §280A residency test.

[Hi Palms]

---

@DaveF1006 wrote:

If you change the software to "Single Family Residence," it will simply put a "1" on that line instead of a "3." 

---

Problem is that's all it does

[bjg_enterprises]

Changing it to short term rental did not remove the loss.

I also tried updating the Active Participant info to 'No' but this didn't remove the loss either.

Any other ideas?

[Hi Palms]

Look at the worksheet and do the calculations yourself. See if anything changes.

[AmeliesUncle]

Do the rental-specific items like management fees, commissions, and advertising create the loss (is the total of those larger than the income)?

Do you Itemize your personal deductions on Schedule A (yes, this and that next ones are all pertinent questions)?

If you do Itemize your personal deductions on Schedule A, is line 5e less than line 5d?

If you do Itemize your personal deductions on Schedule A, is this residence being used for the Mortgage Interest deduction?  If so, is your Mortgage Interest being limited due to the $750,000/$1,000,000 limit for total of all mortgages?