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mdemetry
New Member

I report my short term rental on shedule E last year, can I switch it for C this year?

 
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2 Replies
SusanC6
Employee Tax Expert

I report my short term rental on shedule E last year, can I switch it for C this year?

It depends.  In general, taxpayers who rent buildings, rooms, or apartments and provide basic services, such as heat, light, trash collection, should report their rental income and expenses on Schedule E.

 

Only if substantial services are provided, should a short term rental be reported on Schedule C.  Substantial services include "hotel-like" services of:

  • Cleaning the property daily while it is guest occupied
  • Changing linens daily
  • Providing entertainment and meals
  • Providing transportation

If substantial services are provided, then you must report the operations as business income and report on Schedule C.

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FranklinF
Employee Tax Expert

I report my short term rental on shedule E last year, can I switch it for C this year?

Yes you may. Switching to a schedule C  means that you provide SUBSTANTIAL SERVICES that are primarily for your tenant's convenience. if this is the case, then report your income and expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship).

On the other hand, you may still operate a rental and NOT be subject to the Passive Loss Rules and be able to deduct ALL the expenses if you qualify as a Real Estate Professional.

The IRS indicates that to qualify as a Real Estate Professional you must meet the following requirements: 

  • More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated.

  • You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated.

For more information please access the following links:

https://www.irs.gov/taxtopics/tc414#:~:text=Real%20estate%20rentals&text=If%20you%20provide%20substa...).

https://www.irs.gov/publications/p925#en_US_2023_publink1000104591





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