Is my airbnb income subject to self employment tax?

[Emma24]

I have seen several posts regarding but im still unclear. This is my situation:

- i have 2 properties

- i clean between guests and provide linens and towels BEFORE the guest arrives. Not during the stay

- i provide wifi. Apts have kitchen, stove, fridge, a/c and tv, sofa, desk and bed. 

- check ins are through lockbox

- i do not provide more than that

- stays are less that 7 days each

- i manage reservations and communication

- im an individual, not a LLC

I read in many places that if substantial services are not provided then it is not subject to self employment tax. But i also read in some other places that if stays are less than 7 days it is subject to it.

I will appreciate any clarification

@taxmodern 

[Bsch4477]

See if this helps. Post again if you have any questions. 
https://turbotax.intuit.com/tax-tips/rental-property/10-tax-tips-for-airbnb-homeaway-vrbo-vacation-r...

[M-MTax]

Here's the key point from the link @Bsch4477 cited:

When you rent out your home, make bookings and provide amenities or services, like coffee or breakfast, the IRS may treat you as being self-employed in the vacation rental business.

Here's the IRS take:

https://www.irs.gov/publications/p527#en_US_2024_publink1000234064

Providing substantial services.

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. 

It has been generally accepted that cleaning and the like means cleaning during the tenant's stay (i.e., during the tenant's occupancy).

[Emma24]

Thank you both. What im understanding so far is that as long as i dont provide substantial services (hotel like services) i dont have to pay SE tax, regardless of the 7 days or less rule that i see around, or how many hours i use during the yr to get ready the airbnb, which is what have me confused. That the 7 days rules and how many hrs one do (material participation) is for how to treat the losses of the activity, not to determine if that income is subject to SE tax. Please correct me if im wrong. 

I worry because i received a IRS Notice CP59 ("You need to file your 2023 tax return"). The reason why i didnt filed it is because i live in Puerto Rico and we dont have to file 1040 unless we have to pay SE tax, in which case we use 1040 PR. I understand one should file a form 15103 stating why i didnt file it, and in my case is because "I am a bona fide resident of Puerto Rico and my only income in 2023 is from rental income without substantial services in Puerto Rico (Sections 937 and 933 of the Code)". This is what im planning to write on the form. Not sure if i should add a letter explaining further or that would be enough; for example adding references to Pub 527 and 334 as reference for the Airbnb treatment (substantial services).

I will appreciate further help. I didn't put the "im in PR" part at first because i wanted to clear if/when Airbnb pays SE tax without adding complexity to the question.

Thanks

[JotikaT2]

Assuming you reside full time in Puerto Rico, unless you have any income as part of your duties as a U.S. Government official and your rental properties are located within Puerto Rico, you would meet the filing exemption as listed in Publication 1321. The location of your rental properties is a factor on whether you need to file a US return or not.  If the properties are located within Puerto Rico, then you would not be subject to filing and can reply to your notice with an explanation on the location of the property.

This resource also has some information you may find useful.  Be sure to check with Puerto Rico to make sure you meet any tax filing requirements if you are considered a bona fide resident.  

@Emma24