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An Excel workbook for owners claiming the short-term rental loophole. Built around the records the Tax Court actually looks for, not a blank grid.
Deducting short-term rental losses against your active income turns on two things: the property averaging seven days or less per guest stay, and you materially participating in running it. The first is a fact about your bookings. The second has to be proven.
In Mirch v. Commissioner (T.C. Memo. 2025-128, decided December 2025) the Tax Court agreed the property qualified as a short-term rental and still denied the losses, because the participation log did not hold up. Three specific things sank it.
The owner logged eight hours per rental day. The court called it a post-event ballpark estimate rather than a record, and threw it out under the reasonable-means standard of Treas. Reg. 1.469-5T(f)(4).
744 hours of on-call time were disallowed. Time you spend reachable is not time you spend working.
Hours claimed for personal cleaning were disbelieved because the same return deducted roughly $10,000 of professional cleaning fees and the guests were charged a separate cleaning fee.
The workbook is laid out to make each of those failures hard to repeat: clock times instead of an hours field, a column for who performed the work, and a description field that expects a sentence rather than a label.
Date, property, who did the work, start and end times, auto-calculated hours, activity, what was actually done, and a place to reference the evidence.
Odometer start and end with auto-calculated miles, the business purpose of each trip, and a deduction column driven by the rate you enter for the year.
Categorized spend with a treatment column that separates what you deduct this year from what has to be capitalized and depreciated, plus an ask-my-advisor flag.
Rolls up your hours, your spouse's hours and all third-party hours, then scores the 500-hour and 100-hour tests and tells you how many hours short you are.
Works in Excel, Google Sheets and Numbers. No email required.
Download the workbookYou need to pass one of them, and the Summary tab scores both from your entries.
You and your spouse together spend more than 500 hours on the property during the year. Clean, but out of reach for most owners with a day job.
You and your spouse together spend at least 100 hours, and more than any other single individual. This is the realistic path, and it is why the log asks who performed each task. A cleaner or property manager who out-hours you defeats it.
One point worth clearing up, because it is widely stated backwards: Real Estate Professional Status does not waive material participation, and it is generally irrelevant to a short-term rental. A rental averaging seven days or less per stay is not a rental activity under Treas. Reg. 1.469-1T(e)(3)(ii)(A), so the section 469(c)(7) rules never engage. Material participation is still the thing you have to prove.
Contemporaneous records of the time you personally spent working on the property: the date, the clock times, what you actually did, and who did it. In Mirch v. Commissioner (T.C. Memo. 2025-128), the Tax Court rejected a log built from standardized 8-hour blocks as a post-event estimate rather than a record, and refused to count hours the owner was merely on call. Log real start and end times as the work happens.
You need to pass one of the material participation tests. The two that matter in practice are the 500-hour test, and the 100-hour test, which requires at least 100 hours and more hours than any other single individual. Spouse hours count toward your total. The 100-hour test is the realistic one for most owners, which is why you also have to track what your cleaner and property manager spend.
Yes, under the 100-hour test. That test requires your participation to exceed that of any other individual, so a cleaner or property manager who spends more time on the property than you do defeats it. Ask your service providers for their hours and log them. Untracked third-party hours are the most common reason the test fails on examination.
Generally no. A rental where the average guest stay is seven days or less is not a rental activity under Treas. Reg. 1.469-1T(e)(3)(ii)(A), so the Real Estate Professional rules in section 469(c)(7) never engage. REPS also does not waive material participation; it only removes the automatic-passive rule for long-term rentals. Either way, material participation is what you have to prove.
It depends on when the property was acquired. The One Big Beautiful Bill Act repealed the phase-down and restored 100% bonus depreciation permanently, but only for property acquired after January 19, 2025. Property acquired on or before that date stays on the old schedule, which is 20% for anything placed in service in 2026. Acquisition is measured by the written binding contract, not the closing date.
How the seven-day rule and material participation combine to make rental losses non-passive.
How a study reclassifies part of a property into 5, 7 and 15-year components.
Estimate the first-year deduction before you commission a study.
Bookkeeping, tax and advisory for short-term rental operators.
Not sure whether your property qualifies, or whether the deduction is worth the study? We will tell you before you spend anything.
Book a callThese templates are a record-keeping tool, not tax advice, and downloading them does not create a client relationship. Tax rules change and outcomes depend on your specific facts. Talk to your tax advisor before relying on any position described here.