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cutwo-comcast-ne
New Member

Will we qualify for rental activity if average rental period is 7 days or less. Average rental period for VRBO 5- days. If not, is it a service?

I use TurboTax business. Where to enter this activity - Other?
TT :"An activity is not a "rental activity" if:
  - The average period that a customer used the rental is 7 days or less."
2 Replies
RayW7
Expert Alumni

Will we qualify for rental activity if average rental period is 7 days or less. Average rental period for VRBO 5- days. If not, is it a service?

You should report this rental income on schedule C as a business.  

 

If you have an average rental period of less than 7 daysthe IRS will automatically assume you are running a business, and that income will be reported on Schedule C. 

 

Rental properties use Schedule E to report income and expenses. Businesses use Schedule C.

 

Generally, Schedule C is used when you provide substantial services (such as a hotel or a Bed and Breakfast) in conjunction with the property or the rental is part of a trade or business as a real estate dealer. 

 

Regarding Schedule C versus Schedule E:

IRS Pub 527 states "If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040). Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc.

This is interpreted as running a hotel-like business, with tenant services. If you rent a furnished condo (with kitchen items and linen, for instance), you are not necessarily running a hotel. But if you change the linen and/or provide maid services during the tenant's stay, then this could be considered running a hotel, and the activity should be reported on Schedule C.

 

 

cutwo-comcast-ne
New Member

Will we qualify for rental activity if average rental period is 7 days or less. Average rental period for VRBO 5- days. If not, is it a service?

Thank you RayW7 for the prompt answer! I use Turbotax busines for the first time and am a bit confused with Turbotax Business entry in "About your business" page. We have an LLC which operates Rental property as well as provides Home automation service. Turbotax shows options "We perform a service", "We rent real estate to others"  and "Other". In the "Real estate" activity option Turbotax mentions the 7 days average limitation. Our customers usually rent the property for 5 days.

I am OK with schedules C and E, but LLC provides schedule K-1 to partners to report share of partnership's earnings.

Hope this helps.

Best, 

K

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