If you own multiple short-term rentals (STRs), 🏡🏠 you need to Ctrl+F in your 1040 for your "grouping election" or "469." This lets you combine these properties into one activity so your hours count together for material participation. And by qualifying for material participation, you can use those losses against your other income. 🔀

The problem is there are two different elections, and a lot of tax pros file the wrong one (if they file one at all).

The Choices

The two elections are Reg. 1.469-9(g) and Reg. 1.469-4. ✍️

Same section in the code, but they do very different things. Using the wrong one can mess up your material participation position if the IRS ever audits you.

Reg. 1.469-9(g) is for grouping rental activities. Think long-term rentals and mid-term rentals where you're not providing "hotel-type services." 🛌 This is the REPS grouping election, and it only applies to properties that the tax code considers "rental activities."

Reg. 1.469-4 is for grouping activities that are NOT rental activities. That includes hotel-like operations, short-term rentals that qualify for the loophole, 🏖️ and mid-term rentals where you provide substantial personal services. These are treated more like businesses even though they still show up on Schedule E.

Which Way Western Man?

So which election do your properties fall under? It depends on two things:

• How long your guests stay on average and 📆
• Whether you provide "personal services" 😉 (j/k)

👉 If your average guest stay is over 30 days and you don't provide personal services, that's a traditional rental. It's a rental activity, and you group it under 1.469-9(g). 👈

👉 If your average guest stay is between 8 and 30 days with no personal services, that's still a rental activity. Same election. Still 1.469-9(g). 👈

👉 If your average guest stay is 7 days or less and you don't provide personal services, the IRS does not consider that a rental activity. That's your STR loophole property. You group it under 1.469-4. 👈

👉 If you provide substantial personal services at any stay length, the IRS treats it like a hotel. Daily or mid-stay linen changes, concierge, transportation, on-site fitness or spa all count as "personal services". That's also grouped under 1.469-4. 👈

Here's a quick reference:

The rule is simple ("simple" 🤣). If the IRS considers it a rental activity, you use 1.469-9(g). If the IRS does not consider it a rental activity, you use 1.469-4.

For Example

Let's say you run a bed and breakfast 🥓 and you also have an Airbnb 🌴 with a 5-day average guest stay. The B&B is hotel-like because of the services you provide. The Airbnb qualifies for the loophole because the average stay is under 7 days.

Neither one is a rental activity. 🙅‍♂️ That means you can group them together under 1.469-4 as a single activity. Your hours from both properties get combined, which makes it a lot easier to hit the 500-hour material participation test (thereby to use those losses).

But Wait, There's More

Before you start grouping everything together, ✋ the IRS does have rules about what counts as an "appropriate economic unit" (basically what makes properties eligible to group together).

Under Treas. Reg. 1.469-4(c), they look at five factors:

• Type of business,
• Common control,
• Common ownership,
• Geographic location, and
• Whether the activities depend on each other

You don't need all five. You just need a reasonable case. 📖 Two STRs you manage yourself in the same city? That's easy. An Airbnb in Arizona and a B&B in Vermont with totally different management? 😥 That's going to be a tougher argument.

The geographic factor is probably a little outdated. The real question is whether you can realistically manage these properties as one operation.

The Takeaway

If your STR loophole properties are grouped under 1.469-9(g), you likely filed the wrong election. Those properties are not rental activities, so they belong under 1.469-4.

Now, you'd need to get a pretty sharp IRS auditor to pick up on that - but it's real exposure. Happy searching! 🔍

Have a safe Mardi Gras, everyone! 🎉

🫡

Meme Cleanser 🧼

parks @parkersity_9 Hacker : I have all your passwords Me : OMG thank you what are they 6:44 PM • Feb 9, 2026 2439 Retweets 29919 Likes Read 116 replies

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Douglas A. Boneparth @dougboneparth When you’re dead, you don’t know you’re dead. The pain is felt by others. The same thing happens when you’re stupid. 3:45 PM • Feb 10, 2026 1129 Retweets 6915 Likes Read 261 replies

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Nat Miletic @natmiletic "If I can get you an extra 20 calls per week, could you handle that kind of volume?" 11:11 PM • Feb 9, 2026 94 Retweets 4133 Likes Read 87 replies

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Roger Ledbetter @rledbetterCPA Met a business owner a few years ago killing it Profitable partnership. Break-even S-corp I told him: "Have your CPA look at aggregating your QBI" Didn't want to move his taxes - CPA was a long-time family friend and he didn't want to hurt the relationship I get it. Fast 5:48 PM • Feb 12, 2026 0 Retweets 14 Likes Read 1 replies

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Worst Finance Takes @Lifeinvestmoney Just did my taxes and I'm getting my biggest refund ever $42,385 Turns out you can just put whatever numbers you want in the income and expense columns until you get the biggest return number 8:41 PM • Feb 9, 2026 92 Retweets 8782 Likes Read 68 replies

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