Here's a fact most STR investors don't know: if your cleaning crew works more hours on your property than you do, you fail the IRS 100-hour material participation test — even if you personally logged 150 hours. The "more than anyone else" rule requires you to track not just your hours, but everyone else's too.
This single requirement trips up more material participation claims than almost any other factor. Investors focus entirely on their own hours, hit 105 or 115, and consider the box checked. Then they don't account for the cleaner who did two-hour turnovers after every booking, twice a week, for nine months.
The math is unforgiving. Let's break down exactly how this rule works, who it covers, and how to track contractor hours without making your life complicated.
The "More Than Anyone Else" Test Explained
The material participation test most STR investors use is Test 3, found in Temp. Reg. §1.469-5T(a)(3). To qualify, you must meet both conditions:
- You participate in the activity for more than 100 hours during the year
- No other individual participates in the activity for more hours than you during the year
Condition 2 is the one most investors overlook. You must beat every other individual participant — not just reach a fixed threshold. Even if you hit 200 hours, a property manager who logged 210 hours would cause you to fail.
Critically: the comparison is individual, not combined. This is a point of genuine confusion that works in your favor once you understand it.
If Cleaner A logs 90 hours and Cleaner B logs 85 hours, their combined total is 175 hours. But you don't need to beat 175. You only need to beat the highest individual total — 90 hours. Log 91 hours yourself, and you pass, even though the two cleaners collectively worked 175 hours on your property.
The regulation at Temp. Reg. §1.469-5T(a)(3) uses the phrasing "no other individual...participates in the activity for more hours during the year than the taxpayer." Each person is measured separately against you.
This is the single most common reason material participation claims fail in audit. Not failure to reach 100 hours — failure to account for contractor time, leading to an undocumented worker who logged more individual hours than the owner. For the complete picture of how the 100-hour test works, see our 100-hour rule explained and complete material participation guide.
Who Counts as "Anyone Else"?
The regulation captures anyone who participates in the activity — meaning any individual performing services in connection with the STR operation. This includes:
People Whose Hours Count Against You
- Cleaning crews and housekeepers. Every turnover clean counts. If they spend 2 hours per clean and you have 60 bookings per year, that's 120 hours — potentially more than you spent.
- Property managers and co-hosts. This is the most dangerous category. A professional property manager handling guest communications, check-ins, and operational tasks can easily accumulate 200–400 hours per year on a single property. If you use full-service management, qualifying for material participation is nearly impossible.
- Maintenance contractors and handymen. A contractor who performs regular preventive maintenance, repairs, or seasonal prep adds up quickly, especially on older properties.
- Virtual assistants working on your STR management. If you employ a VA to handle guest messaging, reviews, or calendar management for your STR, those hours count.
- Any person paid to perform operational services related to the short-term rental activity — landscapers maintaining the property, pool service techs, HVAC technicians under service contracts, etc.
People Whose Hours Do NOT Count Against You
- Guests. A guest's occupancy of the property is not participation in the rental activity. Guests are consumers, not workers. Their nights on-property are irrelevant to the test.
- Partners or investors who don't actively work. A silent partner or co-owner who contributes capital but performs no services doesn't affect your count.
- Accountants and CPAs. Professional services related to tax preparation and accounting are generally not considered participation in the rental activity itself — they're professional advisory services. Similarly, attorneys handling lease issues don't count.
- Lenders and inspectors. Third parties who evaluate the property for financing or regulatory purposes are not participating in the rental activity.
When in doubt, ask: is this person performing operational services that directly support running the rental business? If yes, their hours likely count. Consult your CPA for specific situations.
Real Scenarios: Pass or Fail?
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Let's walk through three concrete scenarios to illustrate how the individual comparison works in practice.
Host logs 115 hours. Single cleaning crew logs 90 hours (2h per clean × 45 cleans).
Result: Host (115) > Cleaner (90). Host exceeds 100 hours. No one beats the host. Material participation satisfied.
Host logs 115 hours. Part-time property manager logs 130 hours handling guest communications and check-ins.
Result: Property manager (130) > Host (115). Even though host cleared 100 hours, the PM logged more. Material participation fails. Losses become passive.
Host logs 115 hours. Cleaner A logs 90 hours. Cleaner B (weekend backup) logs 85 hours. Combined cleaner total: 175 hours.
Result: Highest individual is Cleaner A at 90 hours. Host (115) > Cleaner A (90). Combined totals are irrelevant — the comparison is individual. Material participation satisfied.
Scenario B is the scenario that catches investors off guard. The host did the work. The host logged 115 hours. But the property manager did more — and that's disqualifying under Test 3.
If you use a property manager, you may need to switch to a different material participation test (Test 1, requiring 500+ personal hours) or significantly reduce the PM's role to stay below your own hours logged. Discuss this with your CPA before the tax year begins.
How to Track Their Hours Without Making It Burdensome
You're not required to have your cleaners fill out IRS worksheets. But you do need a reasonable record of how many hours each individual spent working on your STR activity during the year. Here are practical methods that work:
Request Invoices That Include Hours Worked
This is the simplest and most defensible approach. Add a line to your cleaner or contractor service agreement requiring that invoices include the date, time in, and time out (or total hours) for each visit. Most professional cleaning services already track this internally for payroll purposes — you're just asking them to include it on your invoice.
A sample contract clause: "Invoices must include the service date, arrival time, departure time, and total hours worked per visit."
Log Arrival and Departure Times in Your Own Contemporaneous Log
When your cleaner arrives and you're at the property (or checking in remotely), note the timestamp. "Cleaner arrived 10:00 AM, finished 12:15 PM — 2.25 hours." This entry in your log serves two purposes: it documents your own supervisory time, and it corroborates contractor hours. See our guide on building a contemporaneous log for the format the IRS expects.
Request Monthly Hour Reports from Property Managers
If you use a part-time or limited property manager, make hour reporting a contract requirement. Ask for a monthly breakdown of hours spent on your property. If the PM uses project management or time-tracking software, request a export. Many property management agreements don't include this by default — negotiate it in before signing.
Ask Contractors to Note Hours on Receipts
Handymen, HVAC techs, and maintenance contractors often invoice by the job rather than by the hour. Ask them to note the time spent even if billing is flat-rate. Even an informal notation ("4 hours on site, replaced water heater") gives you documentation for your records.
Review Cleaning Service Platform Reports
If you use a cleaning coordination platform (TurnoverBnB, Properly, etc.), these services log scheduled clean times. Export your cleaning history annually — it includes dates, assignments, and often completion times. This is contemporaneous third-party data that strongly corroborates your contractor hours records.
Estimate Systematically When Records Are Incomplete
If you don't have exact records, a reasonable documented estimate is better than nothing. For example: "Cleaner charges a flat $85 per 2-bedroom turnover. At an average of 1.75 hours per clean × 52 cleans in 2026 = approximately 91 hours." Document your methodology. Reasonable estimates based on a consistent approach are more credible than nothing — but contemporaneous invoices are far stronger.
How DeductFlow Handles Multi-Participant Tracking
DeductFlow's active hours tracker is designed to handle not just your hours, but the full picture required to evaluate your material participation position.
Within the tracker, you can add multiple participants — yourself, a spouse or co-owner, and your contractors (cleaners, property managers, handymen). Each participant has their own hours running total. The dashboard shows you the highest individual total at any point in the year, so you always know your current standing relative to the most-active contractor.
At year-end, you can export the complete multi-participant report to share with your CPA — showing your hours, each contractor's estimated hours, and the running comparison that demonstrates you met the "more than anyone else" requirement throughout the year.
This documentation structure is exactly what a well-prepared material participation claim looks like when it reaches an auditor.
A Note on Good Faith and Accuracy
Tracking contractor hours is a requirement — but it's also an opportunity. Once you see the actual hours your contractors are logging, you may realize that your participation is much tighter than you thought, or that adjusting contractor scope will make the test easier to pass.
Some investors discover that a simple change — reducing property manager responsibilities to a narrow set of tasks while handling guest communications themselves — shifts the balance comfortably in their favor without adding significant burden.
Do not fabricate or understate contractor hours to game the comparison. Beyond the ethical issue, falsified records in a tax context create far greater exposure than simply failing the test. Your CPA is relying on accurate information to prepare your return. Provide it.
For more on what activities count and how to structure your own hours log, see our post on what counts as material participation hours for STR.
Frequently Asked Questions
Does my cleaner's hours count against my material participation test?
Yes. Under Temp. Reg. §1.469-5T(a)(3), to meet the 100-hour test you must not only log more than 100 hours yourself — you must also log more hours than any other single individual who participates in the activity. If your cleaner works 120 hours on your STR and you work 115 hours, you fail the test even though you exceeded 100 hours.
Do I have to beat the combined total of all my contractors' hours?
No. The test is individual, not combined. If Cleaner A logs 90 hours and Cleaner B logs 85 hours, you need to beat the highest individual total — 90 hours — not the combined 175 hours. Each worker is compared to you individually.
Does a property manager's hours disqualify my material participation?
Yes, a property manager's hours count. If you hire a full-time or part-time property manager who spends more hours on your STR activity than you do, you fail the "more than anyone else" component of Test 3. This is one of the most common ways the material participation strategy fails for investors who use professional property management.
Do guest stays count as "participation" hours for the test?
No. Guest occupancy does not count as participation in the STR activity. Guests are customers, not workers. The participation test applies only to individuals performing management, maintenance, or operational activities related to running the rental business.
How do I get my cleaner to report their hours?
The simplest approach is to add an hours-reporting requirement to your cleaner agreement or service contract. Ask cleaners to note time in and time out on each invoice. Alternatively, if you use a cleaning coordination platform like TurnoverBnB, request a year-end hours report — these platforms log scheduled and completed clean times automatically.