The 7-Day and 30-Day Rules – Rentals are generally passive activities. However, an activity is not treated as a rental if either of
these statements applies:
A. The average customer use of the property is for 7 days or fewer—or for 30 days or fewer if the owner (or someone on the owner’s
behalf) provides significant personal services.
B. The owner (or someone on the owner’s behalf) provides extraordinary personal services without regard to the property’s average period
of customer use.
If the activity is not treated as a rental, then it will be treated as a trade or business, and the income and expenses, including prorated interest and taxes, will be reported on Schedule C. IRS Publication 527 states: “If you provide substantial services that are primarily for your tenant’s convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C.” Substantial services do not include the furnishing of heat and light, the cleaning of public areas, the collecting of trash, and such.
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