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Schedule C or E for vacation rental.

Forum|Forum|6 years ago
June 1, 2019
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We have two properties that we rent out. One is a long term rental that we provide just the house and some basic utilities. That sounds like schedule E. But we have a short term vacation rental condo that we provide furnishings, utilities, linens, etc. But we bought it in October and had no income from it for the remaining months of 2016. But it has incurred expenses. Do I use schedule C or E for the vacation rental condo?

TurboTax Self Employed Online

Best answer by PatriciaV

Yes, if the vacation rental condo was held out for rent (even if you had no rental income), you would include the property expenses on your tax return. (See IRS Pub 527: "Vacant rental property")

Regarding Schedule C versus Schedule E:

IRS Pub 527 states "If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040). Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc."

This is interpreted as running a hotel-like business, with tenant services. If you rent a furnished condo (with kitchen items and linen, for instance), you are not necessarily running a hotel. But if you change the linen and/or provide maid services during the tenant's stay, then this could be considered running a hotel, and the activity should be reported on Schedule C.

If you believe you are not running a hotel-like business, the vacation condo rental may be reported on Schedule E.

The easiest way to find either schedule in TurboTax Online is to go to My Account >> Tools >> Topic Search. Type in "schedule e" or "schedule c", click the topic in the drop-down list, then click "Go." This will take you directly to the start of this section.

PatriciaVAnswer

Employee

Yes, if the vacation rental condo was held out for rent (even if you had no rental income), you would include the property expenses on your tax return. (See IRS Pub 527: "Vacant rental property")

Regarding Schedule C versus Schedule E:

IRS Pub 527 states "If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040). Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc."

This is interpreted as running a hotel-like business, with tenant services. If you rent a furnished condo (with kitchen items and linen, for instance), you are not necessarily running a hotel. But if you change the linen and/or provide maid services during the tenant's stay, then this could be considered running a hotel, and the activity should be reported on Schedule C.

If you believe you are not running a hotel-like business, the vacation condo rental may be reported on Schedule E.

The easiest way to find either schedule in TurboTax Online is to go to My Account >> Tools >> Topic Search. Type in "schedule e" or "schedule c", click the topic in the drop-down list, then click "Go." This will take you directly to the start of this section.

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J

jjrlaw-joe

Yes but if your average period of rental is 7 days or less it is not a "rental activity". The "substantial services" standard comes into play when your average period of rental is 30 days or less.

N

nutbrain

I purchased a condo in vacation area through a 1031 exchange. To maintain business use of the property, I elected to rent the condo using a management company that contracts with the HOA. I am not required to rent the unit as an owner, nor am I required to use the company associated with the HOA to rent or lease the property. Rentals are restricted to less than 30 days, however most guests/renters stay less than 7 days. The management company gets a percentage of the net rents after expenses to advertise, take rental information, collect rent, set fees, clean, do some basic repairs under $200 without need for owner approval, provide linen and towels and other guest services for renters of the property. I'm being careful to only visit the property once a month to make sure it is being maintained and cleaned well, and to do repairs and cleaning that the management company has not done. (learned my lesson not to be hands off due to bad prior experience with a management co. who let things go.) Will use for personal reasons no more than 14 days or less than 10% of days rented per year to keep this from being a second home/personal use. My question is, am I now in the vacation rental/hotel business with a schedule C? rather than using schedule E as I did for the single family home I rented before? What is the business code for schedule C if so. Do I need to 1099 the management company for the services it provides to me? Thanks.

C

candycanepanda

It should be on Schedule E typically.

D

DiddlyD

If you did not provide personal services such as cooked meals, laundry service, house cleaning during their stay, driving them where they need to go etc. You are not in the hospitality business which is like a bed and breakfast or Hotel with room service which you then would report on schedule C; therefore, you only rent and don't do anything more than maintenance as needed even if it comes with linens and cookware and utilities you report on Schedule E Rents and Royalties.

D

DiddlyD

If you did not provide personal services such as cooked meals, laundry service, house cleaning during their stay, driving them where they need to go etc. or rented an average of more than 7 days per stay, report on Schedule E. You are not in the hospitality business which is like a bed and breakfast or Hotel with room service which you then would report on schedule C; therefore, you only rent and don't do anything more than maintenance as needed even if it comes with linens and cookware and utilities you report on Schedule E Rents and Royalties.