Sorting through short-term rental income rules can feel like navigating a maze. You’re expected to know whether your client’s Airbnb or VRBO earnings belong on Schedule C or Schedule E, and whether self-employment tax kicks in.

The IRS doesn’t make it easy, but with the right knowledge, you can guide your clients through these decisions and help them avoid unnecessary tax liabilities.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: If an Airbnb is a rental activity but does not provide significant services, would this be reported on Schedule E (Form 1040), Supplemental Income and Loss?

A: If an Airbnb is just a rental of space, meaning the taxpayers only provide the use of the property (furnished or unfurnished) and do not provide substantial services like meals, cleaning during the stay, tours, or concierge-type amenities, then the IRS treats it as a rental activity. In this case, report the income and expenses on Schedule E. It is not considered a trade or business for self-employment tax purposes, as no significant services were provided.

Q: My client owns an Airbnb property that is usually rented for less than seven days. However, this year, she rented one of the properties for three months and then for two months. Should I report the income on Schedule C, Profit or Loss From Business, or Schedule E for tax purposes?

A: Based on what you’ve described, it will come down to whether substantial services were provided, not just the length of stay. Schedule E is used if no substantial services exist (e.g., repairs, trash removal, client between guests, etc.). These services are provided only to maintain the property. Schedule C is used if the taxpayer provides substantial services to guests, such as a hotel or bed and breakfast, including meals, cleaning during the stay, and concierge-type amenities. The rental is more like running a business (hotel, etc.), not simply collecting rent on the rental.

Q: What about rentals that last a ‘season’? Our clients rent out houses and apartments surrounding seasonal activities in our area, so one renter can occupy a property for as long as fourteen weeks.

A: The tax treatment follows the same IRS framework for “seasonal” rentals, like summer beach houses, ski chalets, or lake cabins rented for a few weeks to a few months. The length of the stay alone doesn’t trigger Schedule C. The passive activity rules provide that it is a rental activity unless the taxpayer also provides substantial services.

Q: What about the event space rental business? Rent building space for events?

A: An event space rental business is generally not treated the same as a residential rental for Schedule E; it’s usually a Schedule C business. The IRS treats real property differently when renting for nonresidential purposes (e.g., parties, weddings, corporate events) rather than as a dwelling unit. Typically, the taxpayer is engaged in an active business of providing event space, often with staff coordination, setup, cleaning, utilities and possibly security, all of which are substantial services.

To learn more about short-term rentals, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.

You’ve likely had clients ask about using 529 for things other than college. Thanks to updates in the SECURE 2.0 Act and the One Big Beautiful Bill Act (OBBBA), these plans now cover a wider range of goals, from K-12 tuition to Roth IRA rollovers.

To give the best advice, you need a clear grasp of the latest rules, including how to avoid errors and maximize tax benefits for families, business owners and retirees.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Are charter and parochial schools included in the definition of elementary and secondary education?

A: Yes, it does include charter and private schools.

Q: If you report the earnings as taxable, can you use the entire distribution for the education credit?

A: Yes, you could use the entire distribution for the American opportunity tax credit (AOTC) or the lifetime learning credit (LLC). With that said, there is a limit on expenses used to determine each. For example, the ATOC is based on $4,000 of expenses. If there are qualified education expenses left, those should be used towards the 529 plan distribution.

Q: Do private musical instrument lessons qualify?

A: Usually, no. Private musical instrument lessons do not qualify as a 529 plan qualified education expense unless they are part of an eligible educational institution’s program. 529 qualified expenses are limited to specific tuition, fees, books, supplies and equipment required for enrollment or attendance at an eligible educational institution. Private music lessons could be covered if: 1) the student is enrolled in an eligible college or K-12 school, 2) the lessons are required for the degree or course of study, and 3) the payment is made to the school or an affiliated instructor as part of the tuition or required fees.

Q: The expenses are expanded for the federal. Does that mean that the states must follow?

A: No. If federal law expands what’s considered a qualified 529 plan expense, states do not have to follow automatically. 529 plans are authorized under federal law, and the federal definition of “qualified higher education expenses” determines whether you avoid federal tax on earnings. However, some state income tax laws are separate. Each state decides whether to: 1) conform immediately to the new federal definition, 2) conform later (often after the state legislature passes an update), or 3) not conform at all. Meaning the expenses might be tax-free federally but taxable for state purposes.

To learn more about the new potential of 529 plans, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.

Tax professionals who apply for or renew their preparer tax identification number (PTIN) will see a lower fee going forward. The IRS has finalized regulations reducing the PTIN user fee, bringing welcome relief to preparers who must maintain this number yearly.

Why the change was needed

For years, the PTIN fee was higher, but a court decision in 2023 found the prior fee structure excessive. That decision pushed the IRS and Treasury to revisit the fee calculation. Under federal law, agencies are permitted to charge user fees, but these fees must be based on the actual cost of providing the service. After reviewing the numbers and updating its cost model, the IRS settled on a new fee that more accurately reflects expenses.

The new PTIN fee amount

The final rule sets the IRS portion of the PTIN fee at $10, down from the previous $11. To arrive at the new number, the IRS built a cost model for the 2024-2026 period. This model looked at direct and indirect costs, including labor, overhead and the expense of maintaining systems that support PTIN applications. Those costs were divided by the number of expected applications that were expected to arrive at the current figure. By tying the fee directly to actual expenses, the IRS meets its obligation to ensure that user fees are fair and consistent with federal standards.

Preparers also pay a third-party contractor fee of $8.75, which covers system processing and maintenance. The contractor fee is locked in under the current contract until 2026, but it could be adjusted depending on new contract terms. The total cost per application or renewal is $18.75 starting Sept. 30, 2025. Applications received prior to that date will pay the $11 fee for a total of $19.75.

Who will see the lower PTIN fee

This fee applies to all individuals who prepare or assist in preparing federal tax returns for compensation. That includes independent preparers, those working in firms and others who must maintain a valid PTIN. The IRS estimates that more than 800,000 individuals apply or renew their PTIN each year, so the change affects a large portion of the profession.

Don’t forget about the new ID.me requirement

Beginning July 7, 2025, PTIN users with a Social Security number will be required to log in to the PTIN portal using ID.me credentials. The IRS has retired the old username and password login for these users. Creating an ID.me account requires a government-issued photo ID, a camera-enabled device and an email address. Once verified, the ID.me account can be used to access and manage PTIN applications securely. Preparers who already use ID.me for other government services can sign in with the same account.

Summary of the upcoming PTIN renewal season

For tax professionals, there are a few key points to keep in mind:

• The PTIN remains mandatory for anyone preparing federal returns for compensation.
• The total fee is now $18.75.
• The contractor fee could change in 2026 when the current contract expires.
• ID.me credentials are required for PTIN login beginning July 7, 2025.
• PTIN renewal is expected to open Oct. 16, 2025.

PTINs expire on Dec. 31 of the calendar year for which they are issued. Paid tax return preparers and enrolled agents, who need to apply for an initial PTIN or renew a PTIN expiring on Dec. 31, 2025, should use the online portal, which takes about 15 minutes to complete. A paper option, Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal, along with the instructions, are also available for PTIN applications and renewals. However, the paper form can take approximately six weeks to process (more if the government is shut down).