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[quote=Anonymous]Financial Solution Advisors, PLLC
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schedule c or schedule e
Do rental property owners file Schedule C or Schedule E?
By Joel Chamberlain
June 22, 2021
Business Growth, Business Tax, Individual Tax
Our recent blog addressed many of the tax issues inherent in renting your vacation home on Airbnb, VRBO, or another platform. Which form to file (Schedule C or Schedule E) with your tax return is a classic area of confusion for owners of short-term rentals, and the answer is often unclear for Airbnb hosts and other property owners navigating their first tax season with a vacation rental. It’s important to work with a tax professional who understands all the nuances of the law in this area to ensure you’re filing the right forms and also maintaining the required records.

First, here’s a brief explanation of the differences between the two forms.

Schedule C: Profit or Loss from Business
In general, when you are self-employed and actively work in your business, you report the income and deduct allowed expenses on Schedule C. You can think of it as income that you have to do something to earn. Income reported on Schedule C is subject to self-employment tax.

Schedule E: Supplemental Income and Loss
Typically, Schedule E is used to report passive income, including income from rental real estate. You do not deduct business expenses on Schedule E, as they are not considered allowable deductions. You are also subject to Passive Activity Loss Rules, which limit the amount of passive income that can be offset by losses.

If you’re thinking that your vacation rental requires a lot of “active” work for you to manage listings, find guests, and maintain the property, it may seem like Schedule C is the obvious choice. However, the IRS has a lot of specific rules for reporting short-term rental income and losses that don’t necessarily align to that simplified Schedule C vs. Schedule E explanation above. You’re also probably thinking that you will want to be able to deduct your expenses to offset your income (which will require filing Schedule C). But again, there are many nuances and it’s even possible that your rental income can be considered non-taxable.

Schedule C Requirements for Airbnb and VRBO Hosts
Generally, you will file Schedule C for your short-term vacation rental if:

The average guest rents the property for fewer than 7 days, or
The average guest stay is fewer than 30 days AND you provide guests with “substantial services”
Schedule E Requirements for Airbnb and VRBO Hosts
Generally, you will file Schedule E for your short-term vacation rental if:

The average guest rents the property for more than 7 days and you don’t provide “substantial services”, or
The average guest stay is longer than 30 days[/quote]

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