Co-Hosts, Property Managers, and Material Participation: Who Counts as a Participant for §469

The 60-second answer

The 100-hour test has two parts. Reg. §1.469-5T(a)(3): the taxpayer participates more than 100 hours in the activity during the taxable year AND participates not less than any other individual. Miss the second half, the whole test fails.
"Any other individual" is broad. The regulation reads "including individuals who are not owners of interests in the activity." Cleaners, handymen, co-hosts, property managers, marketing help, and anyone else performing work in connection with the activity all count.
Spouses combine. Reg. §1.469-5T(f)(3) aggregates spouses' hours for material participation regardless of joint-filing status. That aggregation is on the owner side of the comparison, not on the other-participants side.
Compensation structure doesn't reduce hours. Revenue-share, flat fee, per-turnover pricing: all are payment mechanics, not evidence of low participation. The hours are the hours.
Three practical options when someone outworks you: (a) aim for the more-than-500-hours test under Reg. §1.469-5T(a)(1), which has no other-participant restriction; (b) scope-limit the arrangement so your hours exceed each contractor's; (c) accept that material participation isn't reachable on that property.
Track everyone throughout the year. Reg. §1.469-5T(f)(4) tolerates "any reasonable means" of record, but reconstructed year-end counts are weak. Owner hours, spouse hours, and every other participant's hours need a running log.

Not tax advice; general framework only. Confirm with a qualified tax professional how the tests apply to your specific facts and participant arrangements.

The second half of Reg. §1.469-5T(a)(3) in plain English

Reg. §1.469-5T(a) lists seven material-participation tests. Test 1 (more than 500 hours) is the safest and highest-bar. Test 3 (more than 100 hours) is the one most STR owners aim for because 100 hours per property per year is often achievable without full-time attention. Test 3 reads, in full:

"The individual participates in the activity for more than 100 hours during the taxable year, and such individual's participation in the activity for such year is not less than the participation in the activity of any other individual (including individuals who are not owners of interests in the activity) for such year."

Two conditions, both required. Reading the second condition without the first-half framing is what causes the most confusion. The comparison is not owner-vs-total-of-all-others; it is owner-vs-each-single-other-individual. If any single other participant works more hours than the taxpayer across the taxable year, the test fails, even if the taxpayer is above 100 hours and the other participant is below 100. The parenthetical is where the trap lives: it explicitly includes non-owner individuals, meaning contractors, cleaners, and W-2 employees all count.

Reading the reg's plain text this way is the standard practitioner position: a taxpayer who clears 100 hours but is beaten on hours by even one paid contractor generally loses on the (a)(3) prong. Consult a qualified tax professional on how courts in your circuit have applied the second-half comparison to specific facts. See our guide on how many hours qualify for material participation on an STR for the underlying test breakdown.

One note on the "more than" language: the regulation reads "more than 100 hours," not "at least 100 hours." Reaching exactly 100 does not satisfy the first half; the count must exceed 100. Precision matters at the margin.

Who counts as "any other individual" in a typical STR arrangement

The regulation's "including individuals who are not owners of interests in the activity" language sweeps in anyone doing work on the property that qualifies as participation. Common categories:

Cleaners (W-2 or 1099). Every turnover clean is participation in the activity. A cleaner doing 40 turnovers per year at ~3 hours per turnover is at ~120 hours per property. That's above 100 by itself. (Duration per turnover varies with unit size: studios can be ~90 minutes; a 4-bedroom vacation home is often 5-6 hours.)
Handymen and repair contractors. Hours spent on specific repair work count as participation. Occasional visits stay small; recurring monthly maintenance visits add up.
Co-hosts. Whether through the Airbnb Co-Host tool or an informal arrangement with a friend or neighbor, guest-message handling, cleaning coordination, key handoff, and review responses all count as participation.
Property managers. Full-service management (bookings + guest ops + turnovers + repairs + accounting) is almost always the highest-hour participant on any managed property.
Marketing and pricing help. A person you pay to update your listing photos, adjust nightly pricing, or respond to negative reviews on your behalf is participating.
Family members helping. A relative who cleans between bookings for you counts as an "individual participating." The regulation does not carve out family. Note that this is separate from the spouse-aggregation rule in (f)(3), which applies only to legally-recognized spouses.

Who doesn't count:

Guests. Guests are the customers of the activity, not participants in it. Their time in the property doesn't count against you.
One-time contractors on capital projects. A roofer replacing the roof, or an electrician rewiring a panel: those hours are on a capital improvement, generally not on operating the STR activity itself. The line gets blurry on major-repair vs improvement calls; talk to your CPA if a large project happens in the tax year.
Vendors providing standardized services with no property-specific customization. A subscription service you pay for (channel manager, dynamic pricing tool, insurance) doesn't have "individual participants" whose hours you're competing with; the service is a purchase, not a person's work in your activity.

The line to internalize: does a specific human being spend time doing work on THIS property's operation? If yes, their hours count against your (a)(3) comparison.

What "in connection with the activity" actually means

Reg. §1.469-5T(f)(1) defines participation as "any work done by an individual (without regard to the capacity in which the individual does the work) in connection with an activity in which the individual owns an interest at the time the work is done." The "in connection with" phrase does most of the categorization work. Some concrete cases:

In connection with: guest messaging, booking calendar management, dynamic pricing adjustments, cleaning turnovers, restocking, minor repairs, review responses, tax and books work, marketing photo updates, listing description edits, guest handoff, insurance shopping, occupancy-tax filings.
Not in connection with (investor activities, excluded under Reg. §1.469-5T(f)(2)(ii) unless the owner is directly involved in day-to-day management or operations): reviewing monthly financial statements, analyzing portfolio-level performance, meeting with the accountant to review results, monitoring the STR investment as a passive owner would.
Grey zone requiring facts: education and training (Tax Court cases have gone both ways; the standard is whether the study is "customarily done by an owner"); driving to/from the property (Tax Court practice interpreting Reg. §1.469-5T generally does not treat travel time as qualified participation, though the regulation itself does not affirmatively exclude it).

The investor-activity exclusion is the one that gets misapplied most often on the owner side. If an owner's actual role is "receive monthly statements from the property manager and review them," those hours are excluded from the owner's count under (f)(2)(ii). But that same exclusion means the owner is not competing with the manager on hours; the owner is barely participating at all, and material participation on that property was never within reach.

For the other-participants side of the (a)(3) comparison, the regulation does not independently define what counts as a non-owner's "participation"; (f)(1) defines it for the owner-taxpayer. In practice, courts and practitioners apply the same "work in connection with the activity" concept to non-owners for the (a)(3) comparison, and the (f)(2)(ii) investor-activity carve-out does not reduce non-owner hours because non-owners are not investors. So whether the person is a W-2 employee, an independent contractor, a co-host, or a favor-doing friend, if their work is in connection with the STR activity, their hours count.

Three options when a co-host or manager outworks you

Option A: Aim for the more-than-500-hours test

Reg. §1.469-5T(a)(1) is a single-condition test: more than 500 hours of participation in the activity during the taxable year. No other-participant comparison. If owner-plus-spouse hours per property per year comfortably exceed 500, you don't need to track anyone else's hours for material-participation purposes; the (a)(1) test doesn't ask.

500 hours is roughly 10 hours per week for 50 weeks per property. Achievable on a single actively-managed property; harder on a portfolio of three or more without full-time attention. For owner-operators running one or two properties with light external help (turnover cleaner only, no co-host, no full-service manager), 500 hours is often the safer target than defending an (a)(3) hour-count race against every contractor.

Option B: Scope-limit the arrangement to stay under owner hours

If (a)(3) is the target, structure external help so no single individual's annual hours can exceed yours. Instead of one cleaner doing every turnover, distribute cleaning across two or three; instead of one full-service co-host, use a piecework arrangement (per-message, per-review-response) with multiple people. The trap: distributing hours across multiple contractors doesn't reduce your risk if any one of them still individually beats you.

A more sustainable approach is often to increase owner hours rather than decrease contractor hours. If you're already at 120 owner hours and the cleaner is at 110, adding 30 more owner hours through more hands-on turnover involvement or property inspections gets you to 150 vs 110, and the test clears with a clear buffer. A thin margin (numbers a few hours apart) is inherently harder to defend than a wide one, so aim for a buffer rather than a tie-breaker.

Option C: Accept the property doesn't qualify and treat it as passive

Some properties don't fit the STR-strategy profile. A vacation home run by a full-service manager because the owner lives 2,000 miles away and works a demanding W-2 job may simply not be reachable for material participation on any test. In that case, the STR is treated under the default §469 rules: if the average customer stay is 7 days or less, it's a trade or business without material participation (passive activity), and losses are still subject to the §469 passive-loss suspension. If the average customer stay is longer than 7 days, it's a rental activity under §469(c)(2) with the same passive-loss treatment.

This is a legitimate posture. Not every property has to be run under the loophole strategy. The alternative is trying to structure your way into material participation on a property where the operational reality doesn't support it, which is a common way material-participation claims get challenged. The ≤7-day threshold is the most common Reg. §1.469-1T(e)(3)(ii) exception; longer average stays can still qualify for trade-or-business treatment under (e)(3)(ii)(B) (avg ≤30 days with significant personal services) or (e)(3)(ii)(C) (extraordinary personal services regardless of period), with fact-specific analysis. See our LTR-to-STR conversion framework for the full six-exception list.

Some hosts consider a §1.469-4 grouping treatment to combine multiple STR activities into a single activity for material-participation-testing purposes. This can help hit the more-than-500-hours threshold on a portfolio basis, but it does not eliminate the (a)(3) other-participant problem: the combined activity still has to satisfy whichever test the owner is targeting, and if a manager runs multiple properties for you, that manager's combined hours across the grouping may be higher too. Grouping is a facts-based determination of activity boundaries with disclosure requirements under Rev. Proc. 2010-13 and binding-year consequences; see our multi-property record-keeping guide for the grouping mechanics and talk to your CPA before grouping.

How to actually track everyone else's hours

Reg. §1.469-5T(f)(4) permits establishing participation "by any reasonable means" and clarifies that "reasonable means" may include appointment books, calendars, or narrative summaries. It does not require formal time-card systems. That flexibility applies to the taxpayer's own hours and, by extension, to establishing the participation of other individuals for the (a)(3) comparison. Some workable patterns:

Ask hourly contractors for invoiced hour counts. Most cleaners billing on an hourly basis already track their time and produce an invoice with hours; ask for it in the standard invoice format. Handymen and repair contractors similarly.
Back-solve flat-fee arrangements from typical duration. A cleaner charging $150 per turnover with no time reported can be estimated: ask them once "typically how long does a turnover take?" and multiply by turnover count. Document the conversation and the assumption.
Track platform-mediated messaging time separately. If a co-host is handling guest messaging through Airbnb, the platform's message-count and response-time data can inform a defensible estimate (roughly 5-10 minutes per guest thread depending on complexity).
Get a monthly hours summary from full-service managers. Full-service management contracts should include periodic activity reporting; a monthly hours-worked summary is a reasonable request that most managers will accommodate. Note that (a)(2), the "substantially all" test, also fails in the full-service-management scenario for the same reason: if the manager is doing substantially all of the participation in the activity, the owner's share is not substantially all.
Log family / friend / neighbor help contemporaneously. Informal arrangements often go untracked because there's no invoice; add a note to the property's log every time someone else does work.

What doesn't hold up: assuming the contractor's hours are zero because you never asked, reconstructing counts from memory in April for the prior tax year, or blanket assertions that "the cleaner probably does about X hours" with no supporting basis. The regulation tolerates estimates, but estimates need to have a factual basis behind them that a taxpayer could point to on examination.

See our reference on how to prove material participation to the IRS for what contemporaneous records actually look like on examination.

The Airbnb Co-Host tool specifically

Airbnb feature descriptions in this section are based on publicly available information as of August 2026; Airbnb has updated the tool's permissions, payment structure, and adjacent features multiple times in recent years, so verify current behavior with Airbnb's own Help Center before relying on any specific claim below.

The Airbnb Co-Host tool is a platform feature that lets a listing owner assign a second person to help manage the listing, with a compensation structure that can be a revenue share (a percentage of nightly earnings) or a flat fee. Co-hosts can be given permissions ranging from messaging-only to full listing management including calendar, pricing, and payouts. Some things worth being precise about for §469 purposes:

Revenue share is not evidence of low hours. An 80/20 revenue split with the co-host reads as "the owner takes 80% because the owner does most of the work" but the (a)(3) test doesn't care about compensation percentages; it cares about actual participation hours. If the 20%-share co-host spends 10 hours per week on guest messaging and turnover coordination and the owner spends 3, the co-host beats the owner on hours regardless of the compensation ratio.
Co-host activities that count as participation: guest messaging, review responses, dynamic pricing adjustments, cleaning coordination, guest identity checks, host-status compliance work, and damage-claim resolution work. Broadly, everything the co-host does inside Airbnb's operator interface on this listing counts.
Co-host activities that generally don't count as participation in your activity: the co-host's own bookkeeping (tracking their commissions), their marketing of themselves as a co-host to other owners, their tax filings. Those are their own activities, not yours.
The permission scope changes the practical hour count. A messaging-only co-host has a narrow work scope and typically lower hours. A full-management co-host is essentially a property manager, and hours are typically high.

A practical position for many owners: use a co-host for peak-season overflow (a two-month burst) rather than year-round coverage. The co-host's hours over a two-month peak may still be lower than the owner's full-year hours, keeping the (a)(3) comparison on the owner's side.

Property-manager arrangements

Full-service property management is where the §469 material-participation strategy usually breaks. A full-service manager handles bookings, dynamic pricing, guest communication, cleaning coordination, minor repairs, restocking, review management, and often accounting reconciliation. Across a year, a full-service manager typically logs several hundred hours per actively-managed property.

Compared to an owner who is not on the ground and interacts with the property mainly through monthly performance reports and occasional decisions, the manager will typically beat the owner on hours. The (a)(3) test fails in the first check; the (a)(1) 500-hour test is out of reach unless the owner is somehow doing full-time work in parallel on top of the manager (rare and duplicative). The remaining five tests are also unlikely to help here: (a)(2) "substantially all" fails for the same reason (a)(3) does (the manager is doing substantially all); (a)(4) aggregates significant-participation activities at the portfolio level and rarely fits an owner-outweighed-by-manager fact pattern; (a)(5) requires material participation in five of the last ten years, which the owner doesn't have if the manager has always run the property; (a)(6) is for personal service activities, not STRs; and (a)(7)'s facts-and-circumstances test looks poor for an absentee owner regardless.

Two structural moves owners with full-service management sometimes consider:

De-scope the management contract. Switch from full-service to bookings-only, or cleaning-only, and take back the operational load in the areas that produce owner hours (guest messaging, restocking, minor repairs, pricing). This is a real operational shift, not a paperwork restructure; the owner has to actually do the work the manager was doing.
Split the property between multiple scoped contractors. One vendor for cleaning, one for bookings, one for maintenance, each with a scope narrow enough that no single one's hours exceed the owner's. This works only if the coordination overhead of managing three vendors is worth the tax outcome.

A subset of owners with full-service management run their properties as investment assets that generate passive rental income intentionally, without pursuing the loophole strategy. That's a viable choice; the property still produces income, the manager still runs it, the §469(a) passive-loss suspension applies if losses arise, and losses release against future passive income or on eventual disposition under §469(g). Not every property has to be a §469 non-passive activity for the overall real-estate strategy to work.

When the more-than-500-hours test is more practical

For owner-operators with any meaningful external help, the more-than-500-hours test under Reg. §1.469-5T(a)(1) is often more defensible than the 100-hour test. The bar is higher (500 hours per activity per year, ~10 hours per week for 50 weeks), but the analysis is simpler: one number, one comparison to one threshold, no participant enumeration.

A quick decision heuristic:

Situation	More practical test
Solo owner-operator, no external help, one or two properties	More-than-500-hours (a)(1) if achievable; more-than-100-hours (a)(3) works with no other-participant issue since there are no other participants.
Owner-operator + one turnover cleaner	More-than-500-hours (a)(1) is often safest; (a)(3) is workable if owner-plus-spouse hours comfortably exceed the cleaner's annual hours (typically ~3 hours per turnover times turnover count).
Owner-operator + co-host (revenue share)	More-than-500-hours (a)(1); (a)(3) requires precise tracking and typically a scope-limited co-host arrangement.
Owner-operator + multiple contractors (cleaner, handyman, pricing help)	More-than-500-hours (a)(1); (a)(3) becomes fragile because you're competing against each contractor individually.
Absentee owner + full-service property manager	Neither. Accept passive treatment on this property; the material-participation tests are structurally out of reach.

General framework only, not personalized planning. Your specific facts (property count, contractor mix, spouse's participation, portfolio-level grouping) change the analysis. Confirm with a qualified tax professional before choosing which test to target.

Where Field Ledger fits (and doesn't)

Most STR tools track only the owner's hours (if they track hours at all). That works for the more-than-500-hours test. It leaves an operator running the more-than-100-hours test with external help without a place to record what the cleaner or co-host is doing, which is exactly the data the (a)(3) comparison needs.

Field Ledger is a record-keeping tool built specifically for the STR loophole's evidentiary needs. It captures your own material-participation hours per property and per activity, and lets you log any non-owner participant hours (cleaner, handyman, co-host, manager) that you become aware of, so the record your CPA works from at year-end contains what they need to evaluate the "not less than any other individual" prong. The tool never machine-asserts material participation; the (a)(3) determination stays with you and your CPA.

Workflow: structured single-record forms and prefixed-line entries are the default. Opt into AI-assisted capture if you'd rather describe the day in one sentence like "2 hours restocking supplies at the Cape Cod unit and swapped a broken lamp; drove 8 miles round-trip to Home Depot for the lamp, Home Depot $28." Field Ledger reviews the draft with you and splits it into an activity-hour log entry (2 hours), a mileage log line with the stated business purpose (8 miles, "supplies for lamp replacement"), and an expense entry ($28, Home Depot). Nothing is asserted for you; the review-and-confirm gate is deliberate, and miles without a stated business purpose are flagged rather than silently multiplied by the standard rate.

What ships today:

Per-property material-participation-hour log against the more-than-100-hours and more-than-500-hours thresholds, with "Reached" or "Below" markers so you know where each property stands mid-year
Per-property average-customer-use tracking under Reg. §1.469-1T(e)(3)(iii)(A) so the ≤7-day threshold is visible before year-end, not after
Per-property §280A(d) personal-use tracking against the greater-of-14-days-or-10%-of-rental-days annual ceiling
§274(d)-substantiation-aware mileage math (miles without a stated business purpose are flagged, not silently multiplied by the standard rate)
Per-property Schedule E CSV export at year-end with MACRS class-life suggestions on capital items and potential de-minimis-safe-harbor flags (≤ $2,500 threshold)

Field Ledger is not the fit if:

The property is fully-managed and you've already concluded material participation is out of reach. A general rental bookkeeping tool (Stessa, Baselane, QuickBooks Online with class tracking) fits the passive-rental workflow better; the specialist §469 record is overhead you don't need on that property.
You're pursuing Real Estate Professional Status (§469(c)(7)) as your primary path. Field Ledger deliberately does not model the §1.469-9(g) rental-real-estate aggregation election; see our comparison of Field Ledger vs REPStracker vs Track Your STR for tools built for that strategy.

Start free trial

714-day free trial, no credit card required. Renews monthly or annually at the plan price you select until canceled. Cancel anytime in Manage Billing. Plus applicable US sales tax. Not tax advice.

Frequently asked questions

Do my cleaner's hours really count against my material-participation test?

Yes, under Reg. §1.469-5T(a)(3). The 100-hour test requires more than 100 hours of participation AND that no other individual participates more than the taxpayer. The regulation explicitly includes people who are not owners: "including individuals who are not owners of interests in the activity." A cleaner performing turnovers is participating in the activity; those hours count against the owner's owner-vs-others comparison. If the cleaner's annual hours exceed the owner's annual hours (owner-plus-spouse hours under Reg. §1.469-5T(f)(3)), the 100-hour test fails, and the owner must satisfy a different test (typically the more-than-500-hours test in (a)(1)) to establish material participation. Not tax advice; consult a qualified tax professional for how the test applies to your specific facts.

What about my spouse's hours on the property?

Under Reg. §1.469-5T(f)(3), spouses' participation counts together for material-participation purposes without regard to whether they file a joint return. Your spouse's hours add to yours for both the more-than-100-hours test and the more-than-500-hours test. The spouse-aggregation rule operates on the owner side (owner-plus-spouse combined), not on the other-participants side; the "not less than any other individual" comparison in (a)(3) still runs owner-plus-spouse against each other individual, one by one. Contemporaneous logs need to be kept for both spouses' hours; the spouse's participation is not presumed. Not tax advice; consult a qualified tax professional for how the rule applies to your specific filing status and facts.

If I hire a co-host and pay them a small revenue share, do their hours still count against my test?

Yes. Compensation structure doesn't change the participation analysis. Reg. §1.469-5T(f)(1) defines participation as work done in connection with the activity; whether the person is paid a fixed fee, a percentage, or nothing at all doesn't alter whether the work counts. A revenue-share arrangement (such as the Airbnb Co-Host tool) is a payment mechanic, not evidence of low hours; the co-host's actual hours (guest messaging, cleaning coordination, dynamic-pricing adjustments, review responses) are the hours that count against the owner's (a)(3) comparison. Compensation may inform how the manager or co-host classifies their own tax reporting, but it does not reduce their hour count for §469 purposes. Not tax advice; consult a qualified tax professional for how the analysis applies to your specific facts.

What if I have a property manager who runs everything?

Full-service property managers almost always work more hours on a given property across the year than the owner does, which typically fails the 100-hour test's second half. Owners with full-service managers usually need to satisfy the more-than-500-hours test under Reg. §1.469-5T(a)(1), or restructure to a scoped-services engagement where the manager handles specific tasks (bookings only, cleaning only) rather than full operation. Some owners with full-service management concede material participation isn't reachable on that property and treat the STR as a passive activity by default; that's a legitimate posture but forecloses the §469 loss-offset strategy on that property. Talk to a CPA about the specific facts before choosing between structural options.

How do I actually track a contractor's hours if they don't volunteer them?

Reg. §1.469-5T(f)(4) says the taxpayer may establish participation "by any reasonable means." In practice, cleaners and handymen can be asked to submit invoiced hour counts (many do this anyway for time-based billing); flat-fee arrangements can be back-solved from turnover count times a defensible typical duration (for example, 3 hours per turnover, verified by asking the crew once). The regulation tolerates estimates as long as they are defensible and consistent, though estimates are weaker than actual counts. What doesn't work: assuming the contractor's hours are zero because you never asked, or reconstructing from memory in April for the prior tax year. Get the numbers throughout the year, not at year-end. Not tax advice; the sufficiency of any particular estimation approach depends on facts and circumstances.

Is the 500-hour test easier than the 100-hour test when I use a co-host?

For most managed STRs, yes, but the bar is higher in absolute terms. The 500-hour test (Reg. §1.469-5T(a)(1)) requires more than 500 hours of participation in the activity across the taxable year, roughly 10 hours per week for 50 weeks. The 500-hour test has no "not less than any other individual" restriction, so the co-host, cleaner, or manager's hours are irrelevant to it. If owner-plus-spouse hours comfortably exceed 500 per property per year, the 500-hour test is the safer path and eliminates the need to track anyone else's hours for material-participation purposes. If you're between 100 and 500 hours and using external help, the 100-hour test's second half becomes the operative constraint. Not tax advice; consult a qualified tax professional on which test applies to your facts.

Related guides

Statutory sources

General information about U.S. federal tax rules for STR material participation; not tax advice.

The key takeaway

The more-than-100-hours material-participation test under Reg. §1.469-5T(a)(3) has a second condition most operators miss: the taxpayer's participation must be not less than any other individual, including non-owner individuals. Cleaners, handymen, co-hosts, and property managers all count. If any single external participant beats the owner-plus-spouse hour count across the year, the test fails, and material participation has to be established under another test (typically the more-than-500-hours test in (a)(1)) or conceded on that property. Compensation structure doesn't reduce the hour count; contemporaneous tracking of everyone's hours across the year is what makes the test defensible. For owner-operators with meaningful external help, the (a)(1) 500-hour test is often more practical than trying to win the (a)(3) hour race against each contractor. Not tax advice: this is a general framework, not personalized planning. Consult a qualified tax professional on which test to target and how to structure the arrangement for your specific facts.

Start free trial

714-day free trial, no credit card required. Renews monthly or annually at the plan price you select until canceled. Cancel anytime in Manage Billing. Plus applicable US sales tax. Not tax advice.