Short-term rental tax rules, explained

Regulation references are stated as of October 7, 2026. Rules can change; check the date before relying on them.

Walk through the rules

The 7-day average-stay rule

Under Treas. Reg. §1.469-1T(e)(3)(ii)(A), an activity is not a rental activity if the average period of customer use is seven days or fewer. The average is total rented days divided by the number of separate stays (§1.469-1T(e)(3)(iii)). It is measured each year, so a change in your booking mix can change the result.

The 30-day rule with significant personal services

Under §1.469-1T(e)(3)(ii)(B), an average stay of 30 days or fewer also falls outside the rental-activity rules if you provide significant personal services. Routine turnover cleaning generally isn't enough; the regulation looks at the services as a whole (§1.469-1T(e)(3)(iv)). This is a facts-and-circumstances question.

Material participation: the seven tests

If one of those exceptions applies, the rental is treated as a business. Losses are non-passive only if you materially participate, which means meeting any one of these tests in Treas. Reg. §1.469-5T(a), as of October 7, 2026:

1. You participate more than 500 hours during the year.
2. Your participation is substantially all of the participation in the activity by anyone.
3. You participate more than 100 hours and not less than any other individual, including cleaners and managers.
4. The activity is a significant participation activity, and your significant participation activities total more than 500 hours.
5. You materially participated in any 5 of the preceding 10 years.
6. For a personal service activity, you materially participated in any 3 preceding years.
7. Facts and circumstances show regular, continuous and substantial participation of more than 100 hours. This test is unavailable if anyone else is paid to manage the activity (§1.469-5T(b)(2)(iii)).

Your spouse's hours count (IRC §469(h)(5)). Hours must be provable by reasonable means, such as a log, calendar or messages (§1.469-5T(f)(4)).

Passive-loss limits

If the rental is passive for you, losses generally offset only passive income. Unused losses are suspended and carried forward, and released when you dispose of the property in a fully taxable sale (IRC §469(b), (g)). For rentals that stay in the rental-activity rules, a limited allowance of up to $25,000 may apply for active participation, phasing out between $100,000 and $150,000 of modified adjusted gross income (§469(i)).

Real estate professional status (REPS)

REPS is a different route. It requires more than half of your working hours, and more than 750 hours, in real property businesses where you materially participate (IRC §469(c)(7)). It matters for rentals that are rental activities. If your short-term rental already falls outside the rental-activity rules, REPS generally isn't what decides it; material participation is.

Placed in service vs. acquired

These are two different dates. The acquisition date is generally when a binding written contract was signed (Treas. Reg. §1.168(k)-2(b)(5)(ii)), and it sets which bonus depreciation rate applies. The placed-in-service date is when the property is ready and available to rent, which starts depreciation. A property bought in December and first listed in January can land in two different tax years. See cost segregation for Airbnb owners for how the January 19, 2025 date works.

Personal use

If you use the property personally for more than the greater of 14 days or 10% of the days it is rented at a fair price, it is treated as a residence and deductions are limited (IRC §280A(d)(1), (c)(5)). Expenses, including depreciation, are split between rental and personal days (§280A(e)). Days you spend mainly on repairs generally don't count as personal use.

What to bring to your CPA

• Total rented days and number of stays, by year.
• A log of your (and your spouse's) hours, and a rough count of cleaners' and co-hosts' hours.
• Personal-use days.
• Your contract date, closing date and first-available-to-rent date.

Then check whether a study fits with Can you use it? and Is it worth it?