Quote from @Theresa McGallicher:
I have researched this topic extensively on Bigger Pockets and elsewhere and I am still struggling to understand the tax code.
I have a STR property that went into service in Jan 2022. I met the Material Participation requirements that year, and took our taxes to our preparer with the expectation of a refund. She filed our STR on Schedule E, and we owed $7000 to the IRS, because the rental income was added to our W-2 income, which was over $150,000. We were told that none of our real estate losses could be deducted.
After we paid, I reached out to another STR owner who recommend her tax preparer. The new CPA amended our 2022 taxes and filed our STR on Schedule C, so we recieved a refund of $6000.
Now we are preparing to file for 2023, and I was told by some STR gurus, and also read on here, that we should not be using Schedule C since we are not providing daily hospitality services. However, I don't see how filing with Schedule E can be benficial due to the Passive Activity Loss Rules.
What am I missing here?
Good morning, Theresa, as mentioned- you need to save your time (money) and get a STR CPA. Shameless plug for Ryan Bakke - one of the best in the business.
Online, you're going to get 300 different opinions, and the IRS won't accept "someone on BP told me I could do this".
If you and I knew how to do it perfectly- we would be STR CPAs.
