Airbnb and S Corp - Yes or No

July 25, 2026

This memorandum addresses the tax implications of short-term rental income—specifically Airbnb—and evaluates the impact of entity choice on reporting requirements and long-term estate planning. For individual owners, the activity is typically reported on Schedule E or Schedule C depending on the nature and extent of services provided. However, complications arise when rental properties are held in certain entity structures, such as single-member LLCs taxed as S corporations, which may offer operational benefits but pose significant disadvantages for tax basis treatment upon death.

Of particular concern is the treatment of property held within an S corporation at the time of an owner's passing. Unlike direct ownership or ownership through a partnership or an LLC taxed as a partnership, which generally allows for a full stepped-up basis of the property itself, assets held inside an S corporation do not receive this benefit. Only the stock receives a step-up in value, resulting in potentially unfavorable capital gains exposure for heirs if the property is sold or transferred. This distinction is critical when evaluating entity structures for rental real estate with estate planning in mind.

Disclaimer: The content of the memorandum is provided for general informational purposes only and is not intended to constitute legal, tax, accounting or other professional advice. You should not act or rely on any information herein without seeking the guidance of a qualified professional who is fully aware of your individual circumstances. Neither the author nor the publisher assumes any responsibility for errors or omissions or for outcomes related to the use of this information.