STR "Non-Passive" Rules: Qualify Without REP Status + Ready-to-Use Time-Log Template
Most investors assume you need Real Estate Professional (REP) status to free up rental losses. Not always. With short-term rentals (STRs), there's a path to non-passive treatment without REP – if you set up the activity correctly and prove material participation. Below is the plain-English playbook, common traps, and the documentation you'll want on file (including a downloadable time-log template).
⚖️ Quick disclaimer: This is educational, not legal/tax advice. STR rules are nuanced and fact-specific – loop in your CPA before filing.
The Two Gates You Must Clear
Gate 1) Make sure your STR isn't a "rental activity" under §469
An activity is treated as non-rental (i.e., a trade or business) if it meets one of the exceptions to the rental rules. The two most relevant for STRs:
7-Day Rule – The average period of customer use is 7 days or less.
30-Day + Significant Services Rule – The average stay is 30 days or less and you provide significant personal services (think hotel-like services beyond basic cleaning and linens between stays).
Why this matters: If your STR is non-rental, you can potentially treat it as non-passive if you also meet a material participation test (Gate 2). If you stay "rental," losses stay passive unless you're REP.
How to track the 7-Day test
Use an "Average Stay" log – list each booking's check-in/out dates and let the sheet calculate average nights. If the average ≤ 7, you've cleared Gate 1 via the 7-Day rule.
Gate 2) Prove material participation (you, not your manager)
Once your STR is non-rental, apply the standard material participation tests. The most commonly used for STRs:
500-Hour Test – You (and spouse on a joint return) participate > 500 hours.
Substantially-All Test – You do substantially all the work.
100-Hour + More-Than-Anyone-Else Test – You put in 100+ hours and more than any other individual (including your cleaner/PM/co-host).
Key point: Hours spent by third parties (PMs, cleaners, co-hosts) don't help you, and they do create competition for the "more than anyone else" test. Your own hours must be well-documented and exceed the most active non-owner.
What Counts (and Doesn't) for Your Hours
Usually counts (when directly tied to operating your STR):
Guest messaging, pricing/revenue management, calendar control
Cleaning you perform; turnover inspections and punch lists
Repairs/maintenance you perform; contractor coordination
Check-in/out oversight, supply runs, inventory
Listing optimization, photos, copy, rules, house manual updates
Sales/occupancy tax filings, local compliance tasks
Usually doesn't count (or is risky):
Pure investor/education time (podcasts, courses, market research)
Time spent acquiring a property or major capital planning
General travel unrelated to specific operational tasks
Vague, unsubstantiated estimates ("I probably spent ~10 hours")
Travel time can count only when it's integral to a specific operational task (e.g., driving to perform a repair). Keep notes.
Spouses: On a joint return, spouses' hours combine. Just log them separately and clearly.
Common Pitfalls That Sink Non-Passive Treatment
Hands-off management. If a PM or co-host does most of the work, it's hard to beat them on the "100 hr + more than anyone else" test.
No time log. You'll need contemporaneous documentation. A retroactive summary is weaker.
Significant services without SE-tax planning. Hotel-like services can create self-employment tax exposure. If services are limited to between-stay cleaning/linens, SE tax risk is lower – plan this deliberately.
Grouping mistakes. Don't casually "group" STR with long-term rentals; they're treated differently under §469, and grouping can have unintended consequences.
Confusing "passive" with "QBI." Non-passive status and Section 199A (QBI) eligibility are related but distinct analyses. Handle them separately with your CPA.
Two Real-World Examples
A) Self-managed lake cottage
Average stay: 3.4 nights → Passes 7-Day rule.
Owner hours: ~165 (pricing, messaging, turnovers, minor repairs).
Cleaner hours (contractor): 120.
Result: Likely non-passive under the 100+ & more-than-anyone-else test (165 > 120). Losses can offset W-2/1099 income (subject to basis/at-risk rules).
B) Urban condo with full-service PM
Average stay: 2.7 nights → Passes 7-Day rule.
Owner hours: 55. PM hours: 220.
Result: Fail on material participation. The PM is "more than anyone else," and owner is <100 hours. Losses remain passive.
Documentation: What to Keep (and How)
Time log (date, property, reservation, task, start/end, hours, notes, who did it, "counts toward MP?").
Evidence: Airbnb/VRBO message exports, cleaner invoices, work orders, supply receipts, calendar screenshots, before/after photos.
Average stay worksheet (check-in/out and computed average nights).
Policy file: What services you provide (and don't), house manual, turnover checklist.
Manager/co-host agreement (if any), so you can assess "who did more" credibly.
Your Free Toolkit
STR Time-Log Template (Excel) includes:
Time Log tab with drop-downs and auto-calculated hours
Average Stay tab to test the 7-Day rule
Summary tab to total owner vs. non-owner hours and highlight key tests
Lookups tab with pre-built activity categories
👉 Download the STR Time-Log Template (Excel)
(Pro tip: Keep a printed weekly sheet in a folder at the property for quick notes; reconcile to the Excel log monthly.)
How to Qualify – A Simple, Practical Plan
Decide your path: Aim for the 7-Day rule if possible; otherwise consider whether your operation truly provides significant services (understand the SE-tax tradeoffs).
Operationalize your hours: Reduce PM/co-host involvement or re-allocate tasks so you handle pricing, messaging, turnovers, and minor repairs.
Track from Day 1: Use the template every week. Log who did what. Attach proof.
Mid-year check-ins: At months 3, 6, 9 – review owner vs non-owner hours. If you're short, shift tasks back to you.
Year-end file: Keep a binder (PDF is fine) with time logs, average stay calc, invoices, messages, and a 1-page summary.
CPA review: Before filing, have your CPA review your facts under §469 and confirm any SE-tax/QBI implications.
FAQ (fast answers)
Do my cleaner's or PM's hours help me?
No – they don't help you and they do compete against you for the "more than anyone else" test.
Do my spouse's hours count?
Yes – if you file jointly, spouses' hours combine.
Can I count education or deal-hunting?
Generally no – stick to operational STR work tied to your property.
If I provide breakfast and daily housekeeping, is that risky for SE tax?
Yes – hotel-like services can trigger self-employment tax on profits. Plan services deliberately.
Can I group my STR with my long-term rentals?
It's usually a bad fit – STR and LTR are treated differently under §469. Talk to your CPA before making a grouping election.
Key Takeaway
The STR "non-passive" route is absolutely achievable without REP, but it's won or lost on the facts you can prove. Run the 7-Day test, take back core operational tasks, and keep airtight logs.
Need help tailoring this to your property mix? Book a planning call and bring your time log. We'll review your facts, highlight gaps, and map the cleanest path to non-passive treatment.