That TaxedRight article in the link of the accepted answer is unfortunately is quite confused about pretty much everything. [Update: I contacted the author of the article and he realized it does need some updates/corrections, so it will likely be corrected soon.]
The 7 day test is to determine if it can qualify as non-passive, not to determine if a property is a "trade or business". Most rentals are a "trade or business" (section 162), which means they're subject to QBI.
But a 7 day or less average stay still isn't enough to qualify it as non-passive, material participation is required, and that is a major hurdle that has to be fully understood. And then, it still doesn't go on Schedule C, it goes on E. So it was incorrect about that also. The only exception for a rental is substantial services, which is extremely rare, most Airbnbs don't offer daily cleanings or meals, etc, to qualify for that.
To summarize:
- Short-term rentals go on Schedule E. The only exception is substantial services, and that does not apply to most Airbnbs. They would have to be offering services to the guests during their stay. Cleanings between guests are not substantial services.
- If the rental has an average stay of 7 days or less, and they materially participate (which means 100 hours of logged time personally working on the property if no one else spends more time on it than you do, otherwise it's 500 hours), then it is non-passive. But it still goes on Schedule E. The difference is you can select the "non-passive" option to make any losses bypass form 8582.
