Short-Term Rental Loophole: Schedule C vs. Schedule E – What Every Investor Needs to Know

Published 3 months ago • 1 min read

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Check Out My Episode on The BiggerPockets Short Term Rental Podcast: Bigger Stays

Today’s topic: The Short-Term Rental Loophole — and how the wrong tax form could cost you 15.3% of your income.

A lot of STR owners are mistakenly told to file on Schedule C, which subjects their income to self-employment tax.

But for most investors, Schedule E is the right move — even if their rentals don’t qualify as passive under IRS rules.

In this post, we break down:

The key difference between Schedule C and Schedule E
When short-term rentals trigger self-employment tax (and when they don’t)
How one investor avoided tens of thousands in unnecessary taxes
Why even IRS agents sometimes get this wrong
The IRS memo that supports your case
How to use this strategy to reduce taxes and offset W-2 income

“If you don’t offer hotel-like services, your STR income probably belongs on Schedule E — even if it’s not passive under Section 469.”

Check out the full article to make sure you’re not overpaying come tax time.

Thank you for reading. Please reach out and let me know what resonated with you. I read every email!

Cheers,

Sean

CPA | Founder of Maven Cost Seg and Maven Equities

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References: https://www.therealestatecpa.com/blog/str-loophole-irs-audits-three-arguments-the-irs-is-making/

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