Usually no, not on the same property. The STR loophole requires an average guest stay of 7 days or less, measured across every booking for the year under Treas. Reg. §1.469-1T(e)(3)(iii). A handful of mid-term rental stays of 30 to 60 days heavily weight that average and typically push it past 7 days, which disqualifies the property for that tax year.
Based on IRC §469 and Treas. Reg. §1.469-1T(e)(3), written from the perspective of an investor who runs both short-term and mid-term rentals.
How the averaging math actually works
The 7-day test is not about your typical booking or your median booking. It is a strict average: total days of customer use divided by the number of separate rental periods for the year. Every booking is one period, no matter how long or short.
That definition is what makes mixing dangerous. A mid-term stay adds a large pile of customer-use days but only counts as a single period, so it drags the average up hard.
| Booking mix for the year | Customer-use days | Periods | Average stay | Passes 7-day test? |
|---|---|---|---|---|
| 40 short stays at 3 days + 3 mid-term stays at 45 days | 255 | 43 | 5.93 days | Yes, but fragile |
| 20 short stays at 3 days + 4 mid-term stays at 45 days | 240 | 24 | 10.0 days | No |
| 12 short stays at 4 days + 2 mid-term stays at 50 days | 148 | 14 | 10.57 days | No |
The only row that survives does so because an unusually high volume of short bookings dilutes the mid-term stays. Most operators do not run 40 short bookings on a single door in a year, which is why mixing usually fails in practice.
Why a single mid-term booking does so much damage
Look at the second row. Four mid-term bookings contribute 180 of the 240 customer-use days but only 4 of the 24 periods. The math is lopsided by design. Each mid-term stay you accept buys 30 to 60 days of denominator-free weight that pulls your average toward the mid-term range.
This is the opposite of what most hosts assume. People think "most of my bookings are short, so I am fine." The test does not care about most. It cares about the blended average, and a few long stays dominate it.
If you want to pressure-test your own mix before year-end, run it through the STR Loophole Calculator and watch what each mid-term booking does to the average. The mechanics are covered in the 7-day rule explained.
The 30-day significant-services exception rarely saves you
There is a second exception in the regulations. If your average period of customer use is 30 days or less and you provide significant personal services, the activity can still avoid rental classification under Treas. Reg. §1.469-1T(e)(3)(ii)(B). On paper that sounds like a rescue for a mid-term-heavy property.
In practice it almost never applies, because of how "significant personal services" is defined.
What does not count as significant personal services: services needed to permit the lawful use of the property, services to repair or improve the property, and services commonly provided with rentals of high-grade real estate such as cleaning, maintenance of common areas, and routine repairs. In other words, the exact services a normal STR or MTR operator provides (turnover cleaning, fresh linens, trash, restocking, basic maintenance) are specifically excluded.
To meet the significant-services bar you generally need hotel-style services delivered to the occupant, like daily housekeeping or concierge service. Most mid-term operators do not provide that, so leaning on the 30-day exception is not a reliable plan.
The test is per property, so isolate your mid-term stays
The rental-activity exceptions and the 7-day average are applied per activity. That is the structural fix. If you want both short-term and mid-term income, do not run them through the same door.
- Keep the loophole property short-stay only. This is the property you are cost segregating and depreciating to offset active income. Protect its average. Every booking should be a short stay.
- Run mid-term bookings on a separate property. A different property can carry the longer stays without touching the average on the property you are relying on for the loophole.
- Watch your activity grouping. How you group or separate activities for passive-loss purposes affects how the average is measured. This is worth confirming with your CPA before you commit a property to a mixed strategy.
For the material participation side of the loophole, see the 100-hour test, and if you are claiming a mixed-use property, review the audit red flags first.
Key takeaways
- The 7-day test is a strict average of total customer-use days divided by the number of booking periods, so a few long stays dominate the result.
- A single mid-term booking adds 30 to 60 customer-use days but only one period, which is why mixing usually pushes the average over 7 days.
- The 30-day significant-services exception rarely helps, because normal turnover cleaning and maintenance do not count as significant personal services.
- The test is applied per property. Isolate mid-term stays on a separate property and keep your loophole property short-stay only.
- If you want a defensible loophole claim, do not mix mid-term bookings into the property you are depreciating for the offset.
Sources
- IRC §469 (Passive Activity Losses and Credits Limited): https://www.law.cornell.edu/uscode/text/26/469
- Treas. Reg. §1.469-1T(e)(3) (Rental activity definition, 7-day and 30-day exceptions, average period of customer use): https://www.law.cornell.edu/cfr/text/26/1.469-1T
- IRS Publication 925 (Passive Activity and At-Risk Rules): https://www.irs.gov/pub/irs-pdf/p925.pdf
Last updated: June 2026 Author: Jennifer Beadles, a real estate investor with 17+ years of experience and a multi-state portfolio who operates the Timber & Tide short-term rental in Everett, WA.
This article is for educational purposes only and is not tax or legal advice. Consult a qualified CPA familiar with real estate before implementing any strategy.
Ready to see if you qualify? Try the free STR loophole calculator →