Can I report my business as active income during tax season

Forum|Forum|1 year ago
February 12, 2025
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I own a property where I live in 50% of the space and operate a short-term rental business (VRBO/Airbnb) in the remaining 50%. The business is a single-member LLC (default). I recently learned that to qualify for property depreciation deductions, I need to be actively involved in the business and pay self-employment taxes. Since I actively manage the business—cleaning the space, purchasing supplies, stocking them, and managing reservations on the listing website—can I still report the rental business as active income and claim all the related deductions? How should I go about this?

RobertB4444

Yes. This is a short term rental business (like a hotel) that is entered on schedule C instead of the rental real estate section for schedule E.

So in TurboTax you will scroll down in the wages and income section to 'Business Items' and click start next to 'Business Items and Expenses (Schedule C)'. You will enter all of your income here and be able to enter depreciation for the 50% of your house in use as well.

That makes everything active income and all of your profit will be subject to self-employment tax. On the upside you qualify for a number of deductions including home office and QBI that you would not qualify for with a rental property.

@ermiastam

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