Short-term rentals with average stays between 8 and 30 days sit in the middle of the tax rules. Depending on the services you provide, your income may be passive rental income on Schedule E or business income on Schedule C. This short-term rental tax guide explains the difference.
Quick answer: what is a self rental on Schedule E? A self-rental is property you rent to a business you materially participate in, such as a building you own and lease to your own S corporation. You report it on Schedule E as a “Self-Rental” property, and net income from it is treated as nonpassive. Read the self-rental rules.
Short-term rentals (8 to 30 day stays): Schedule E if you provide minimal services, Schedule C if you provide substantial, hotel-like services. Details below.
How average stay length affects short-term rental tax
The passive activity rules look at the average length of guest stays:
- 7 days or less: generally not a “rental activity.” See our guide to short-term rentals under 7 days.
- 8 to 30 days: not a rental activity if you provide significant personal services. Otherwise, it is treated as a rental activity.
- Over 30 days: generally a rental activity.
For the official rules, see IRS Publication 925.
Stays over 7 days with minimal services: Schedule E
If you provide only basic services, such as cleaning between guests, the property is usually a rental activity. In that case, you report income and expenses on Schedule E.
This income isn’t subject to self-employment tax. However, rental losses are generally passive. So they can only offset passive income, unless an exception applies.
One key exception helps many owners. If you actively participate and your modified adjusted gross income is under $100,000, you may deduct up to $25,000 of rental losses against other income. However, this allowance phases out between $100,000 and $150,000 of income. Real estate professionals may also avoid the passive limits.
Stays under 30 days with substantial services: Schedule C
Some owners provide hotel-like services during guest stays. For example, these include daily cleaning, meals or concierge services. In that case, the activity looks more like a business. So you generally report it on Schedule C.
As a result, your net profit is subject to self-employment tax. On the other hand, if you materially participate, losses aren’t limited by the passive rules. In addition, the business may qualify for the Section 199A qualified business income deduction of up to 20%.
Schedule E vs. Schedule C for short-term rental tax
| Schedule E | Schedule C | |
|---|---|---|
| Typical services | Basic, between stays | Substantial, during stays |
| Self-employment tax | No | Yes |
| Losses | Usually passive | Non-passive if you materially participate |
What is a self-rental on Schedule E?
A self-rental is property you rent to a business you materially participate in, for example a building you own personally and lease to your own S corporation or medical practice. You still report it on Schedule E, where it has its own property type (“Self-Rental”). The special rule is that net income from a self-rental is treated as nonpassive, so it can’t absorb passive losses from your other rentals, while a net loss generally stays passive. Self-rentals to a commonly controlled business may also count toward the qualified business income (QBI) deduction. Short-term rentals to guests, as described above, are not self-rentals.
The rule comes from the passive activity rules in Internal Revenue Code section 469. Rental real estate income is normally passive. IRS Publication 925 explains the exception: if you rent property to a trade or business activity in which you materially participated, net rental income from the property is treated as nonpassive income. For example, say you own an office building personally and lease it to your S corporation, where you work full time. The rent goes on Schedule E as a self-rental, but a net profit from it is nonpassive (IRS Publication 925).
Related guides
- Short-term rentals with stays under 7 days
- Long-term rentals without substantial services
- Active rental real estate: tax rules and strategies
Get help with short-term rental tax
The right answer depends on stay length, services and your hours. We help owners choose the right reporting and plan for losses. To discuss your property, call (415) 842-2940 or book a free 15-minute call.