What is the Short-term rental material participation rule?

The short-term rental material participation rule is the combination of provisions that lets a qualifying rental loss offset non-passive income, such as wages. When the average guest stay is seven days or less, the property is not a rental activity under the passive loss rules, so automatic passive treatment does not apply. If the owner then materially participates, by meeting a material participation test, the loss becomes non-passive and offsets W-2 income without professional status. Accelerated Depreciation and amortization from a cost segregation study often drives the size of that loss.