can I use NON 'passive losses' for short term rental property ?

Question

A CPA (in prior year) told me that if my rental property has avg rental period LESS than 7 days than my losses can be treated as "NON passive" on form 1065. in this case they go on page 1 of the 1065 and I do NOT complete a form 8825

the advantage being that on my personal 1040, these losses can REDUCE my taxable income.  is this true?

this year im using turbo tax for my 2020 1040 and its telling me i owe self employment tax  because of 'non farm gross income' on my k1 even though I have another year of  "net" loss.  where am i going wrong ?

Alan Lacey · Answer

@Mike Stone this podcast just did a series on tax strategies for STR they provide good content. Hope it helps. https://soundcloud.com/therealestatecpa

Mike Stone · Answer

Hi Basit - thank for your response but can you elaborate please?  I was informed that the "special case" avg stay of less than 7 days in the rental  'triggers' the ability for partners to use the early year losses as NOT PASSIVE and have this  flow thru to personal returns to reduce taxable income in these years . are you saying that is not the case?

Basit Siddiqi · Answer

@Mike StoneA partnership with a rental that has average stay of less than 7 days does not go on the front page of form 1065.

Mike Stone · Answer

@Alan Lacey   that was a great suggestion. the podcasts are very informative. thx