Short Term Rental in Georgia- Taxes

[Yuting Yang]

For short term rentals, do you think it's best to go with Schedule c or Schedule e when filing your taxes? I can't seem to get a clear guideline between these two. For the EY guidebook, it appears that C is when you provide meals and daily housekeeping, and that E is for if you do not provide all of these. 

Is it best to leave that question for the CPA? 

[Brandon Hall]

@Katie Thomas thanks for the tag - I haven't updated that podcast episode but I should.

The “7-day rule” that I referred to is found in Temp. Reg. §1.469-1T(e)(3)(ii)(A). It states that an activity is not a rental activity if the average period of use of the property is 7 days or less. 

There is a second rule that says states that an activity is not a rental activity if the average period of customer use of the property is 30 days or less and significant services are provided. (Temp Reg. §1.469-1T(e)(3)(ii)(B))

If the rental is not a rental activity, it should not be reported on Sch E. Instead, it should be reported on Sch C. But just because a rental activity is deemed not to be a rental activity for purposes of the passive loss rules doesn’t necessarily mean that a profit from such activity is subject to self-employment tax due to the exclusion of rental income from SE tax (IRC §1402(a)(1)). 

The question would then become whether the property owner is considered to be a real estate dealer or provides substantial services. If so, and your rental is deemed not to be a rental activity, you may have SE income.