Time you spend actively directing a contractor at your short-term rental generally counts as participation: writing the scope, getting bids, making decisions on site, inspecting the finished work. Time you spend present while the contractor works, with nothing to decide, generally does not. The line the Tax Court keeps returning to is whether services were performed, not whether the owner was on the premises.
That distinction matters to short-term rental owners because renovation and repair weeks are where the hours are. A host who reaches 40 hours in a week does it during a bathroom rebuild, not during a turnover. Those are also the weeks most likely to be logged as one long block, which is the shape of entry an examiner asks about first.
Supervision and spectating produce different hours
Take a day when a flooring crew is at the property. You let them in at 8, showed them the subfloor patch to do first, took a supplier call about a backordered transition strip and decided to substitute a different profile, left for four hours, and came back at 3 to walk the rooms and note three spots needing rework.
Two ways to log that day:
- One entry: "Supervised flooring install, 8 hours."
- Four entries: 25 minutes for access and scope walkthrough; 20 minutes on the supplier call and substitution decision; 15 minutes coordinating the crew's return date; 40 minutes on the closing inspection and punch list. Total: 1 hour 40 minutes.
The first entry is larger and weaker. The second is smaller and describes services actually performed. Enough entries of the first kind and the credibility problem spreads to the entries that were accurate, which is the pattern that sinks otherwise reasonable logs.
What the regulations ask of the hours
Material participation under IRC §469(h)(1) means involvement in the operations of the activity on a basis that is regular, continuous and substantial. Treas. Reg. §1.469-5T(a) sets out the quantitative tests, including the 100-hour test in §1.469-5T(a)(3) that most short-term rental owners aim at, which requires more than 100 hours and more participation than any other individual.
Three more provisions shape a renovation log:
- §1.469-5T(f)(1) excludes work not of a type customarily done by an owner of such an activity, where one of its principal purposes is avoiding the disallowance of losses. Manufactured on-site hours sit uncomfortably close to this.
- §1.469-5T(f)(2)(ii) excludes work done in the capacity of an investor: reviewing financial statements, summarizing operations, analyzing the activity for your own purposes. Deciding whether to renovate at all can read as investor work; directing the renovation reads as operator work.
- §1.469-5T(f)(4) says hours may be established by any reasonable means, and that a ballpark guesstimate will not do. Appointment books, calendars and narrative summaries are named as acceptable forms.
IRS Publication 925 restates the tests in plainer language. Neither says anything explicit about supervision, which is why owners look to the cases.
What active supervision actually includes
These are the pieces of a contractor relationship that involve you performing a service:
- Writing the scope of work and the specification.
- Sourcing contractors, requesting and comparing bids, negotiating terms.
- Scheduling the work around bookings, and rescheduling when a guest extends.
- Providing access, securing the property, moving inventory out of the way.
- Answering questions that require a decision: substitute this fixture, move that outlet, approve the change order.
- Sourcing and buying materials yourself where you did.
- Inspecting progress and completed work, writing the punch list, verifying the rework.
- Handling the warranty claim when something fails three weeks later.
Each of those has a start, an end and an outcome you can describe in a sentence. That is what makes it loggable.
What courts have been unwilling to credit
Hairston v. Commissioner (T.C. Memo 2019-104) is the case short-term rental owners hear cited here, and it is genuinely known for the court declining to treat an owner's presence at a property while hired workers did the job as participation in the operations of the rental. Our write-up of the opinion covers what the court examined in the Hairston log.
The related principle comes from Moss v. Commissioner (135 T.C. 365): being available is not the same as performing services. Hours logged because you could have been needed, rather than because something was done, have the same weakness whether the person you were available for is a guest or a plumber.
This is what the opinions rest on, not a prediction about any particular day. Whether a given block was supervision or attendance turns on facts the opinions cannot generalize, and that is a question for your CPA.
Log the decision, not the hours on site
The working habit that follows from all of this is to record events rather than shifts.
| Weak entry | Stronger entry |
|---|---|
| Contractor day, 8 hrs | Met tile setter, walked scope, marked layout change for shower niche — 35 min |
| Bathroom reno, 40 hrs (week) | Reviewed three bids, selected contractor, signed scope — 1 hr 10 min |
| On site with plumber, 5 hrs | Final inspection, 4-item punch list photographed and sent — 45 min |
| Supervised painters, 6 hrs | Color approval on sample boards, approved change order for ceiling — 25 min |
Corroboration is easier for renovation entries than for most others, because a job generates paper: the bid, the signed scope, the change order, the materials invoice, the before and after photos. STR Tracker lets you attach files to an individual entry, so the punch-list photo and the parts invoice sit with the entry they support rather than in a folder nobody can match up later.
Your contractor is an other participant
The 100-hour test compares your hours to those of every other individual who participated, and a contractor is an individual. A crew of three working eight hours each is three people at eight hours, not one participant at 24, so a large crew on a short job is usually less of a threat to the comparison than a single handyman who is there all season.
Keep their hours the way you keep yours: ask for time on the invoice, or estimate from the invoice and the job. If a renovation ran 60 hours for the lead carpenter against six hours of your own directing time, the comparison prong for that property is a real question rather than a formality, and it is better to know in October than in April. Tracking other participants' time alongside your own is what keeps the comparison current.
Renovations before the first guest
Much contractor work happens before a property has ever been rented. Whether pre-opening hours count is a position rather than a settled rule: the activity has to exist before there are operations to participate in, and "placed in service" generally means ready and available for its intended use. Log the hours anyway, tag them as pre-opening, and let your preparer decide. A logged hour can be excluded later; an unlogged hour cannot be recovered.
A renovation week, honestly logged
For a five-day bathroom rebuild at one property:
- Monday — access, scope walkthrough with lead, moved linens and inventory to the garage: 1 hr 5 min.
- Tuesday — supplier call on backordered vanity, approved substitute, updated the booking calendar to push the reopening by two days, messaged the two affected guests: 1 hr 30 min.
- Wednesday — no involvement. No entry.
- Thursday — mid-job walk, flagged a waste line that was not to spec, photographed it, emailed the lead: 40 min.
- Friday — final inspection, five-item punch list, hardware store run for the towel bar the crew had not fitted, restocked the bathroom: 2 hr 15 min.
That week produced about five and a half hours, not 40. Across a year of maintenance, a host who logs this way ends up with a number they can defend line by line, which is the only kind worth having. If you are starting a log mid-renovation, begin with the next decision you make rather than trying to rebuild the week behind you.