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Subject:  Re: Taxes: Schedule C or E: Date:  12/1/2012  9:06 PM
Author:  PuddinHead42 Number:  72 of 95

Some random findings for the board.

Schedule C is a form used for reporting income subject to self-employment taxes. Any income earned where self-employment taxes must be paid is included on form Schedule C. Income not subject to self-employment tax is included on a Schedule E form, such as income earned through a business name.

Personal property rental income, like machinery or equipment, is Schedule C. Income on a Schedule C is income earned through operating a business where the owner includes income on their personal tax return. Real estate rental income, not subject to self-employment taxes, goes on Schedule E. This occurs when real-estate income is earned for a business name

But that still leaves it open to the IRS to determine if the income "should" pay employment taxes. And was is "earned for a business name"? If you set up an LLC does that fix the issue?
If you rent buildings, rooms, or apartments, and provide only heat and light, trash collection, etc., you normally report your rental income and expenses in Part I of Schedule E (Form 1040). However, do not use that schedule to report a not-for-profit activity. See Not Rented For Profit under Rental Expenses, earlier.

If you provide significant services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040)

Interesting. So IRS might say that since you clean your rental between each visit, it is for their convenience, so now you are subject to schedule C. I could certainly see a desperate government interpreting it that way to get more money. That's why I would prefer a "flat" tax.
Income and expenses related to real estate rentals are usually reported on Form 1040, Schedule E (PDF). Income and expenses related to personal property rentals are reported on Form 1040, Schedule C (PDF)

Real Estate Rentals vs Personal Property rentals (like a bike or car). Hmmm. Maybe the IRS says vacations rentals are now personal property instead of real estate?
Last year when I reported rental income from my condo Turbo Tax listed it on schedule E. This year it is putting it on Schedule C. ? Isn't Schedule C for businesses?

One Answer
Is the condo a vacation rental where the average stay is 7 days or less? If so I do not believe it qualifies as residential rental and therefore is reported on Schedule C. That would be my best guess.

The 7 days or less might be key.

Another answer
But since the condo is not your primary residence, you are running a business by renting it out. This is actually to your advantage as you can claim the costs of doing business on the Schedule C to offset the income

Of course, these are random sources, but start to provide some insight.
In this thread, they argue that Sched C is better and are trying to be able to use C instead of E...

Client files a joint return.