Short Term Rental Expenses

[dslsb]

Each year, expenses for my short-term rental exceed the income. I am not a real estate professional so the amount I can claim is limited. How can I carry over those expenses?

[M-MTax]

Do you have any personal use? 

Typically, TurboTax will carry over any expenses that are limited by Section 280A. If you materially participate in your short-term rental, your expenses are not limited to your rental income.

I'm going to ask @AmeliesUncle (very knowledgeable in this area) if he has more to add or any further insight.

[AmyC]

Two things to look at here:

1. Short term rental has various meanings. If the average stay is 7 days or less, the property is not a rental but a business.  If you participate more than 100 hours a year, the loss becomes non-passive and can be claimed against your current income like w2 or 1099.
2. If you actively participate - making management decisions, you can claim up to $25,000 per year unless limited by your income. Which I believe is your issue. The losses then begin to add up as a Passive Activity Loss  which is a suspended loss to be used in later years. The program will move your losses to Form 8582 to track your suspended loss. Check your return for Form 8582 and note it has a line for current loss (Col a, line 1b) and another for the cumulative loss of prior years (col b, line 1c).

[dslsb]

Is the determination of whether it is a business or I am an active participate made when Turbo Tax asks if I am a Real Estate Professional? The question asks if I spend more than 750 hours involved.

[ThomasM125]

No, that question is just to determine if you are a real estate professional. The loss carryover would not show on Schedule E, it would show on Form 8582 Passive Activity Loss Limitations, on line 1(c).  TurboTax calculates and tracks it automatically and carries it over year to year. I suggest you look on that form to see if there is an amount there.

[M-MTax]

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@dslsb wrote:

Is the determination of whether it is a business or I am an active participate made when Turbo Tax asks if I am a Real Estate Professional? The question asks if I spend more than 750 hours involved.

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Short-term rentals are not a Schedule C-type business unless you provide significant services to your renters.

See https://www.irs.gov/instructions/i1040se#en_US_2025_publink1000152097

However, your losses are not limited with a short-term rental if you materially participate and you don't necessarily need to be a real estate professional for that treatment (again, you need to take any personal use into consideration).

Active participation merely allows any real estate investor who rents their property to deduct up to $25,000 in losses against nonpassive income, which is limited by MAGI.

[AmeliesUncle]

If you "Materially Participate" in the short-term rental, the losses are NOT limited.

Unfortunately, the last I checked TurboTax is NOT set up for that in the Step-by-Step interview.  You need to use the desktop/downloaded version of TurboTax, go into the "Forms", find the "Schedule E Wks" and manually check the box for "Other Passive Exceptions"