Schedule C Vs Schedule E For Vacation Rental Property
I have a vacation rental property that I rent out for less than a week at a time on average. I also use it at times when not rented (less than 14 days but greater than 10%). I have a property manager who handles renters, some advertising and the cleaning. I set the rent and handle all other upkeep on the house.
2003 was the first year that I had this property and I received a 1099-Misc form from the property manager with the management fee and cleaning already subtracted from the amount. Also, it is listed under non-employee compensation rather than rent.
My question is: can or should I use Schedule C and claim it as a sole proprietorship? or am I required to use Schedule E? It isn't clear to me how to make the distinction.
Thanks,
Mike
When your average rental term is less than a week, you are operating a business rather than a rental property. Income from this activity is active income (not passive rental income) and is reported as self-employment income.
Box 7, Non-employee compensation, is used to report payments made to an individual whom the payer does not treat as an employee. Payments reported in this box are treated as Self-employment income. Report this amount on Schedule C, or C-EZ, and complete Schedule SE (Form 1040). You received this form instead of Form W-2 because the payer did not consider you an employee and did not withhold income tax or social security and Medicare taxes.[ Edited by DaveT on Date 02/04/2004 ]