SHORT TERM RENTALS

[Greenacres]

I have a condo and am currently renting it out as a short term rental for about 275 days a year.  I have a property management company. 

• Are there any situations where short term rentals are not considered passive activities?
• With a short term rental, are there any situations where you are not required to be a real estate professional in order to avoid the $25,000 limitation on claiming losses?
• Would you explain this statement:
  • If you do not actively manage your rental, losses are only allowed if there are profits from other passive activities.

[tagteam · Accepted solution]

Material participation is required.

If you provide significant services to the renters, then you are essentially operating in the same manner as a hotel and you would report on Schedule C.

Otherwise, if you use the property for personal purposes more than the greater of 14 days or 10% of the days rented at fair rental value, then the rental is not a passive activity (but still subject to Section 280A limitations).

See https://www.irs.gov/publications/p527#en_US_2023_publink1000219123  AND

https://www.irs.gov/publications/p925#en_US_2022_publink1000104578

[Greenacres]

Thanks so much!!!