Short Term Rental in Georgia- Taxes

8 Replies

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? 

Schedule E.  The keyword is "Daily Service" which is something you do not provide.

@Yuting Yang


You also have to consider the average stay of your guests.
If the average stay is 7 days or below - you may be required to file form schedule C instead of Schedule E.

@Brandon Hall , can you please comment on this? I remember reading an article you wrote which indicated under 7 days and no substantial services then it'll still be schedule C but not subject to SE tax. However, on one of your podcasts, you mentioned below 7 days and you'll have to pay SE no matter what (even if no substantial services are provided). Can you please clarify as this is your subject of expertise? Thank you so much! 

@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. 

@Brandon Hall nailed it. 

Ultimately it comes down to qualifying as a transient property classification. 

Most air Bnb's require schedule C reporting. They're not a passive rental. They're treated more like a hotel. 

HOWEVER

If you're not providing substantial day-to-day services, then there shouldn't be SE tax on the income.  

(Think providing daily breakfast, daily sheet turn down, ect)