Form 8825 the correct one for STR income?

Question

I know STR income is treated as active by IRS (like a hotel) and I have S Corp. My accountant used form 8825 (rental real estate income for S Corp). Is this correct? I would have thought it should appear in a different place on the tax return. If this is not correct, could someone tell me where on tax return should the income appear?

Thanks!

Basit Siddiqi · Answer

@Julie GrothForm 8825 is the equivalent of schedule E. Schedule 8825 is used by partnerships and S-corps. Schedule E is used by individuals.With that said - Form 8825 may or may not be correct depending on the extent of the services you provide to your guests.If you are using form 8825 - then there was likely no purpose of the S-corp setup.

John Underwood · Answer

I also report on schedule E due to being passive.

If you are running a bed and breakfast or providing substantial services then you use schedule C.

Jon Crosby · Answer

I mean first and foremost, your CPA is going to know your situation better than anyone on this forum, so I would defer to their expertise as that is why you are paying them (probably a lot by the way for real estate owned S-Corp).

Many owners of STRs are using Schedule C or E (depending on their activity with the property) but since you are in an S-Corp and must abide by all the rules that are involved with that (to avoid having your corporate veil pearced ), I would imagine the directions for it are pretty straightforward.

I'm not a CPA but do have an S-Corp as well and that is why I pay my CPA to make all these decisions for me, I would just make sure your CPA has audit protection including with their services as an extra layer of comfort.  :)

Best of luck!

Lisa Graesser · Answer

STR income is considered passive unless you provide significant services such as meals, activities or daily maid service like a hotel. I am considered  a sole proprietor so my rental income goes on Schedule E. Circumstances may be different if your STR'S are in an S corp

Luke Carl · Answer

@Julie Groth.  Schedule E over here.

It’s my guess that S Corp is costing you more money than you know. I would ask your CPA how many properties he actively owns.

Michael Baum · Answer

Hey @Julie Groth, @Lisa Graesser hit the nail on the head. STR's are considered passive. We use the Schedule E (our CPA does anyways).

Do you doubt your CPA's skills? Also, why the S corp instead of and LLC? Is it all tied to your other businesses?

Julie Groth · Answer

What do you mean 'at the entity level'? Do you mean that entity that owns or operates the property, the one that filed the 8825? Does it show active or passive on the company's tax return?

Or the character determined by the property itself and what the owner/operator of the property provides to guests?             Are these services hard and fast rules? It doesn't seem like it.

Basit Siddiqi · Answer

@Julie Groth"The passive income or loss is determined at the individual level"It is true that on the individual return you can easily select passive or non-passive but character of the income is determined at the entity level.

Julie Groth · Answer

Thanks!

Michael Baum · Answer

Hey @Julie Groth, here is the IRS page on vacation rentals. There are links in there for passive income etc.

https://www.irs.gov/taxtopics/...

Form 8825 the correct one for STR income?

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