Yes, it is possible, and the Tax Court has allowed it. The 100-hour test in Treas. Reg. §1.469-5T(a)(3) asks two things: that you participated more than 100 hours in the year, and that no other individual participated more than you. Hiring a manager does not fail the test by itself. What fails it is a manager whose time you cannot document, because then the second half of the test cannot be shown either way. In Pohoski (T.C. Memo 1998-17) the same couple won on one condominium and lost on another for exactly that reason.
The test compares individuals, not companies
The regulation says "any other individual (including individuals who do not own any interest in the activity)." That wording matters in both directions. It means your cleaner, your handyman and each employee of the management company are all in the comparison. It also means the management company as a whole is not a single competitor; the question is whether any one person put in more hours on your property than you did.
Most managers spread a property across several people, each touching your listing for a few hours a month. The person most likely to out-hour you is not the account manager but the cleaner who is in the unit for three hours every turnover. The 100-hour test guide walks through that arithmetic.
Pohoski: two condos, two outcomes
George and Bozenna Pohoski were full-time employees in California — an engineer and a nurse — who owned two Hawaiian condominiums in 1993, one on Maui and one on Molokai, each with an average stay of about 6.5 days. The Maui condo was at a resort whose management company, Rainbow Reservations, normally ran everything for owners. The Pohoskis negotiated an unusual arrangement: they advertised and rented the unit themselves, and the management company handled check-in and check-out, maid service and rent collection.
The court did not take the owners' hours at face value. It found some claims implausible — 150 hours of repair work during a two-week "working vacation" implied nearly eleven hours a day — and cut their Maui total to somewhere between 200 and 250. Still above 100; the decisive question was the comparison.
Two features of the court's reasoning are worth knowing:
- It counted actual time, not availability. The IRS argued that the resort's front desk was open nine hours a day, seven days a week, and that all of those hours should count against the owners. The court refused. It looked at what the management company's staff actually did for this unit — five to ten minutes per check-in, two to three hours of cleaning per departure, rent handling — and found that it did not exceed 200 hours and did not exceed the owners' time. The Pohoskis materially participated in the Maui condo.
- It required evidence of others' time. For the Molokai condo the owners had fewer hours to begin with, but the court went further: even assuming they had cleared 100, they had offered no evidence at all of the time spent by the resort's staff. Owners are "required to put forth some indication of the actual time spent" by others. Without it, the comparison could not be made, and the Molokai losses were passive.
The court also cited earlier cases rejecting a shortcut in which owners divided a resort's total staff hours by the number of units. Only actual time on your rental is relevant.
Which of your hours still count with a manager
With a full-service manager, an owner's work shifts from doing to deciding and directing. The guide to what counts as participation covers the general rule; these are the categories that typically survive with a manager in place:
- Pricing and listing decisions you actually make: setting rates, approving minimum stays, rewriting the listing, choosing photos.
- Approvals with substance: reviewing a repair quote and choosing a vendor, approving a refund, deciding on a guest complaint.
- Vendor management you do yourself: sourcing a new cleaner, negotiating a landscaping contract, meeting a contractor at the property.
- Work you keep: guest messaging, restocking, inspections, maintenance you do on visits, furniture and equipment purchases and setup.
Each is an operational task with a date, a duration and, ideally, a paper trail: an email to the manager, an approved quote, a receipt.
Which hours do not
Treas. Reg. §1.469-5T(f)(2)(ii) excludes work done in your capacity as an investor unless you are directly involved in day-to-day management. Reading the monthly owner statement, checking the payout, and studying the market count as investor activity in most practitioners' reading. Time spent "being available" — the owner equivalent of the front desk in Pohoski — does not count for you any more than it counted against the Pohoskis.
The honest test: did you make or do something that changed how the property was run that day? If the answer is "I looked at a report," tag it so a CPA can strip it out.
Estimating a manager's employees' hours defensibly
You will rarely get timesheets. You can get a defensible basis:
- Ask for the task log. Most managers run scheduling software with cleaning and maintenance tickets. A monthly export showing tasks, dates and assigned staff is the best evidence you will find.
- Count turnovers from the booking calendar and apply a per-turnover cleaning time you can justify, as the court did in Pohoski.
- Use invoices. Hourly maintenance invoices are records of someone else's hours.
- Record the method. A note saying "38 turnovers × 3h cleaning, per manager's stated average" is what turns an estimate into evidence.
STR Tracker lets you log other participants' hours per property next to your own, so the comparison is visible during the year rather than reconstructed in February.
Full-service manager, co-host or cleaner only
| Arrangement | Who is likely to out-hour you | What you need |
|---|---|---|
| Full-service manager | The cleaner assigned to your unit; possibly a maintenance tech | Task log or turnover count; your own hours on decisions and visits |
| Co-host (individual) | The co-host, directly | Their hours from platform message timestamps and a shared task list |
| Cleaner only | The cleaner | Turnover count × realistic per-turnover time |
A co-host is usually one person doing many things, which makes the comparison sharper.
A worked example (illustrative)
Fictional property, one year, full-service manager:
- Owner: 62 hours of pricing, listing and approvals; 31 hours of guest messaging kept in-house; 34 hours across three visits for inspections and repairs. Total 127 hours.
- Manager's staff, from the task log: cleaner 40 turnovers × 2.5 hours = 100 hours; maintenance tech 22 hours; coordinator 18 hours.
The owner exceeds 100 hours and exceeds each individual. If the same property had 50 turnovers at 3 hours, the cleaner would be at 150 and the owner would fail the second half despite 127 hours. The number that decides the year is one the owner did not work.
Keep the manager or self-manage: questions for your CPA
This is not a post telling anyone to fire their manager; the Pohoskis won with one. The questions to answer with a CPA before the year gets away from you:
- Which individual on the manager's side is likely to have the most hours, and can we get their number?
- Which tasks could I take back that I would actually do, and would that change the comparison?
- If the comparison is close, is the 500-hour test more realistic than the 100-hour test for this property?
- Does the management contract include services to guests that could affect the seven-day and substantial-services analysis under Treas. Reg. §1.469-1T(e)(3)? A contract that provides hotel-style services can change more than the hours question.
What to write down
For each property, from today: your entries with date, task, actual minutes and corroboration; the manager's task log or turnover count with your per-turnover assumption written next to it; and a monthly note of who on the manager's side did what. If you are starting from nothing, begin a free trial and put the manager and the cleaner in as participants on day one. The Pohoskis lost the Molokai condo not because the staff worked more than they did, but because nobody could say how much the staff worked at all.