Taxation of Short-Term Rentals – Belk on Business – Episode 138
Note: Not giving specific tax advice. Meant to be a high-level primer of some of the basics. Consult your own tax professional for specifics as it relates to your tax situation.
Generally rental income from single family rentals in a traditional sense if a residential property is considered passive. Not subject to self-employment tax and has loss limitations based on hours of activity, real estate professional status and tax structure.
Short-term rentals (Airbnb, VRBO, etc.) are
1) Active is rental period is less than seven days or less than thirty days and significant personal services are provided by you or on behalf of the owner of the property to make the property available for rent.
2) Active – can use any losses to offset other non-passive income if you materially participate in the activity
3) Test for active participation:
a) more than 500 hours during the year
b) individual’s activity and activity on the owner’s behalf constitutes substantially all participation in the activity
c) more than 100 hours during the year and individual’s activity is not less than the participation of any other individual
4) Providing services includes concierge services, conducting guest tours, providing meals/entertainment, providing transportation, providing other hotel-like services. Repairs and maintenance or admin work such as paying bills are not considered services.
5) If active and providing services, the activity goes on Schedule C of personal tax return (if sole proprietor or SMLLC) and subject to self-employment tax. If passive, goes on Schedule E
Subscribe on these platforms:
Apple Podcast: https://apple.co/2Zp6hgj
Spotify: https://lnkd.in/gcWDnFZ
Stitcher: https://bit.ly/34aRgO2
YouTube: https://youtu.be/kqdOljN7z4w
