Rental real estate is normally treated as a passive activity, which means losses from it generally can't offset your W-2 or business income. They mostly just pile up until you sell. Short-term rentals can work differently, and the difference comes down to how long guests actually stay.
The rule itself
If the average guest stay is seven days or less (sometimes a bit longer, with added conditions), the activity isn't automatically treated as a rental for tax purposes at all, which opens the door to it being treated more like an active business. That distinction matters because it's what allows losses, including the accelerated depreciation a lot of short-term rental owners generate on purpose, to potentially offset other income.
The part that actually matters
Getting the average-stay math right is necessary but not sufficient. You also have to materially participate in running the property: a specific, documented level of involvement, not just owning it and collecting a check. This is a place the IRS looks closely, and "I'm pretty sure I worked enough hours" isn't the same as having a log that shows it.
Where this goes wrong
People hear "Airbnb loophole," treat the average-stay test as the whole rule, and skip the participation piece and the recordkeeping entirely. It works until it's examined, and it's one of the more commonly examined situations in real estate tax right now.
If you're running short-term rentals and nobody's confirmed you actually qualify, check before you file.
This post is general information, not specific tax, accounting, or legal advice. Your situation may differ, so talk to us before acting on anything here.