All Forum Posts by: Rose I.

This may apply to both short and long-term rentals...but you tell me because I am unclear.

My husband and I are going to buy our first single-family home or townhome and turn it into a short-term Airbnb rental.

We plan to form an LLC as the holding company for all rental properties we will own.

Question 1: Is it necessary to file the LLC separately for tax purposes or can we still include it on the Schedule E form in our joint tax return?

Question 2: My husband will be the investor/owner and I will be the active property manager for the short-term rental (and any long-term rentals in our future). Is it necessary to show that he, as the owner, is paying me, as the property manager, a management fee/salary expense on the Schedule E form? And if so, do I need to fill out a 1099 contractor form or can he simply send it to me and I show that as my income on the joint tax return?

Appreciate any and all answers! :)

Rose

Hi Yonah. Thanks again for your response. Very helpful!

Yonah, I had a follow-up question. Basically, the same hypothetical situation above but instead of trying to achieve REPS for long-term rentals, could the same aggregation principle be applied towards short-term rentals (i.e., Airbnb)? As in, if I manage a smaller property this summer and we buy additional properties later in the year managed by a Property Management firm, can I use my hours from the one property I managed and aggregate the other properties to prove material participation? Per Sec. 1.469, renting a property out for 7 days or less is not considered a rental activity. Therefore, one of the tests for material participation that can be used is 100+ hours managing the property and substantiating that it's more hours than any other worker on the property. We would then run a cost-seg study to determine bonus depreciation. So basically, if I prove 100 hours on the first property and we aggregate the rest of the properties that I don't have material participation on, would that still qualify us for using the tax losses as allowed for non-passive income?

Thank you, Yonah.

Hypothetical situation: If I am working towards material participation hours on a relatively small property in terms of total value but get there in terms of the technical hours and the test, and say later in the year I purchase multiple properties but am unable to generate material hours on those properties (ex. maybe even <10 hours), would I be able to aggregate all properties for the material participation test and thus qualify the properties bought later in the year for the benefits of bonus depreciation with a cost segregation (helping to offset my husband’s W-2 income)?