STR active vs passive income for tax filing - what's the difference?

STR income classification depends on how much personal involvement you have in managing the property. Based on what you've described (handling bookings, guest communication, cleaning arrangements, and maintenance), you're actively participating in the rental business. The IRS has specific guidelines for determining active vs. passive income. For short-term rentals specifically, if the average stay is 7 days or less, it's generally considered a business rather than a traditional rental activity. This means the income would be reported on Schedule C rather than Schedule E, and you'd potentially be subject to self-employment tax on the profits.

After struggling with this exact STR tax classification mess last year, I finally found something that helped me figure it all out. I used https://taxr.ai to analyze my rental activity and determine the right classification. It basically looked at my level of participation, average rental periods, and services I provided to guests. The tool confirmed I was definitely in "active" territory since I was doing all the management, responding to guests, and providing regular cleaning services. It showed me exactly what forms to use and helped identify tax deductions I was missing (like partial deductions for my phone/internet used for STR management).

I just tried taxr.ai after seeing it mentioned here and wow - super helpful for sorting out my multiple STR situation! I uploaded my rental activity logs and booking data, and it clearly showed that two of my properties should be treated as businesses (Schedule C) while my third property (the fully managed one) could qualify as passive income on Schedule E. The tool explained exactly why each property fell into different categories based on my level of personal services and average stay duration. It even flagged that I've been missing some major deductions on my actively managed properties. Now I understand exactly what forms to use for each property and how to document everything properly. Definitely recommend if you're confused about STR tax classification.

If you're dealing with the IRS about STR classifications, good luck even getting someone on the phone for help. I spent WEEKS trying to get clarification last year. Finally used https://claimyr.com to get through to an actual human at the IRS. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They got me connected to a real IRS agent who explained that my situation (very similar to yours) would indeed be considered active income requiring Schedule C. The agent also confirmed I needed to pay quarterly estimated taxes since my STR was generating significant income. Saved me from potential penalties!

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate for answers about my STR tax situation before filing deadline. I got connected to an IRS tax specialist in about 30 minutes who confirmed my specific rental situation falls under active income rules. The agent explained exactly which parts of my STR activities pushed me into the "active" category and advised me on documentation I need to maintain. I'd spent MONTHS trying to get this information and wasted countless hours on hold. Should have just used this service from the beginning - would have saved me so much stress and prevented me from incorrectly filing last year.

Something nobody's mentioned yet - if your STR activity qualifies as a business (active income), you might be eligible for the Qualified Business Income (QBI) deduction, which could give you a deduction of up to 20% of your qualified business income. This is huge and can offset some of the self-employment tax burden.

I think mileage deductions are being overlooked here. If you're driving 2 hours to your property regularly, those miles are deductible business expenses if you're treating the STR as active income. At 65.5 cents per mile for 2023, that adds up fast!

The key factor for STR classification is the "average period of customer use" - if it's 7 days or less, the IRS generally treats it as a business activity rather than rental real estate. Given that you're actively managing bookings, communicating with guests, and handling maintenance while guests typically stay for weekends or short trips, you're definitely in active income territory. This means Schedule C filing and self-employment taxes on your net profit (around 15.3%). However, you'll also qualify for much better deductions - all those 2-hour drives are deductible mileage, plus your phone/internet costs, cleaning supplies, maintenance materials, and potentially a home office deduction for the space where you manage bookings. Don't forget about the Section 199A QBI deduction either - if your total taxable income is under the thresholds, you could deduct up to 20% of your STR business income, which helps offset those self-employment taxes significantly.