Can I switch from Schedule E to Schedule C? I have a short term vacation rental. I have always filed schedule E. I’d like to show earned income, however.

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February 24, 2023
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Best answer by Anonymous_

Can I switch from Schedule E to Schedule C?

No, not unless you are providing significant services for your renters or are a real estate dealer.

See https://www.irs.gov/instructions/i1040se#en_US_2022_publink24332td0e1083

You cannot simply switch forms to show earned income for some other purpose or gain some other tax benefit.

Anonymous_Answer

Employee

Can I switch from Schedule E to Schedule C?

No, not unless you are providing significant services for your renters or are a real estate dealer.

See https://www.irs.gov/instructions/i1040se#en_US_2022_publink24332td0e1083

You cannot simply switch forms to show earned income for some other purpose or gain some other tax benefit.

brenda1959leeAuthor

Thanks for the info. What is meant by “significant services”? I cleaned the house, changed linens, provided necessities, etc.

Anonymous_

Employee

You might qualify for meeting the definition of of "significant services" if you do those things on a regular and consistent basis while the renter is present on the premises.

The "services" are in the nature of maid services, etc., much like the services provided by a hotel.

Carl11_2

Employee

TO report rental property as a SCH C business, you must provide services that are directly beneficial to the tenant, on a recurring basis. For example, cleanings between tenants and yard care do not count. However, if you provide services such as daily maid services to clean and make the beds, or prepare meals "on a recurring basis" for the tenant, things like that can qualify your rental to be treated as a "trade or service".

If you have been reporting the rental on SCH E in the past and switch your SCH C, it's not simple. For starters, residential rental real estate reported on SCH E is depreciated over 27.5 years, while businss real estate is depreciated over 39 years. So simply switching the property from SCH E to SCH C is not simple by any stretch. It's a double-whammy if your state also taxes personal income.

If you do qualify as a trade or business (which is not common) make absolutely certain you can support that claim if (when?) the IRS questions your change. You should also seek professional help with a local CPA or EA for the switch also, as it is not simple by any stretch. For one thing, your cost basis has to be adjusted for the depreciation already taken, and you personally, outside of turbotax have to keep a record of the depreciation already taken on the SCH E, since you are required to recapture that depreciation and pay taxes on it when you sell or otherwise dispose of the property in the future.