Passive loss treatment
A long-term rental is a passive activity by default, so losses usually offset only passive income. A short-term rental with a 7-day-or-less average stay is not a rental activity — with material participation, its losses can be non-passive and offset ordinary income.
Self-employment tax
Long-term rental income is generally not subject to self-employment tax. A short-term rental that provides substantial services like a hotel (daily cleaning, meals, concierge) can be treated as a business subject to self-employment tax. Most standard STRs without hotel-like services avoid it.
Depreciation life
Residential rental buildings are depreciated over 27.5 years. A short-term rental treated as transient lodging can fall under the 39-year nonresidential schedule, which slightly slows building depreciation even as the STR opens the door to faster loss recognition through material participation.
Frequently asked questions
Is short-term rental income self-employment income?
Only if you provide substantial hotel-like services. A typical STR without those services is not subject to self-employment tax.
Which one lets me deduct losses against my W-2?
A short-term rental with a 7-day-or-less average stay plus material participation can; a standard long-term rental generally cannot without real estate professional status.
Do they depreciate the same?
Long-term residential is 27.5 years; a transient short-term rental can be 39-year nonresidential.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.