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At times a student or parent will claim rental property is a business. Generally, it must be reported as real estate instead. A rental property would have to be part of a formally recognized business to be reported as such, and it usually would provide additional services like regular cleaning, linen, or maid service.
This note mirrors the language from “How To Report Rental Income and Expenses” on page 16 of IRS Publication 527, Residential Rental Property (Including Rental of Vacation Homes). This section of Publication 527 discusses whether rental income is reported on Schedule E or on Schedule C or Schedule C-EZ of IRS Form 1040. In order to file Schedule C or Schedule C-EZ, the taxpayer must “provide significant services that are primarily for your tenant’s convenience, such as regular cleaning, changing linen, or maid service”. It continues “Significant services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc.”.
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Ahh!
I wonder how often the “changing linens” and “maid service” need to be?