What is the 75/55 Rule? (And Why It's Not Actually an IRS Rule)

Regulation reference: the canonical reference for what investors typically mean by the “75/55 rule” — the 7-day average rule under Treas. Reg. § 1.469-1T(e)(3)(ii)(A) and the 30-day-with-substantial-services variant under (B) — lives at /regulations/75-55-rule/. The statutory framework is there; this post explains where the nickname came from.

The “75/55 rule” is not a codified IRS rule. It’s informal investor-forum shorthand that usually refers to state-level transient occupancy or sales tax day-count thresholds — which vary significantly by state and rarely use the numbers 75 or 55 specifically. The three codified federal rules that actually govern short-term rental tax treatment are the 7-day rule under Treasury Reg. §1.469-1T(e)(3)(ii), the 14-day Augusta rule under IRC §280A(g), and material participation under Treasury Reg. §1.469-5T. If a source cites the “75/55 rule” without a specific statute or regulation, treat it as directional shorthand, not filing authority.

The short answer

The “75/55 rule” does not appear in:

• The Internal Revenue Code (Title 26)
• Treasury Regulations
• IRS revenue procedures, revenue rulings, or notices
• Any state’s published tax code under that specific name

What it probably refers to, in most contexts where investors mention it, is a state-level transient occupancy tax day-count threshold — the number of days a guest must stay before a rental is treated as long-term lodging rather than transient lodging, which determines whether state or local lodging/sales tax applies. Those thresholds exist. They just don’t use the numbers 75 or 55 in the states we’ve examined.

If someone tells you the 75/55 rule applies to your federal income tax treatment of a short-term rental, ask them for the IRC section or Treasury Reg cite. There isn’t one.

What state transient occupancy thresholds actually look like

States that levy transient occupancy, sales, or lodging tax on short-term rentals generally define “transient” by the length of an individual guest’s stay. Stays below the threshold are taxable; stays at or above are treated as long-term residential rentals and typically exempt from transient tax (though they may be subject to other rules).

Common thresholds (not exhaustive — verify your state):

• 30 days or less = transient is the most common pattern, used in many states including Florida (Florida Statute §212.03), Arizona (TPT Transient Lodging), and California (varies by city/county TOT ordinance).
• 6 months or less appears in some jurisdictions.
• 90 or 180 days appears in others.

The number 75 and the number 55 do not show up as canonical thresholds in any state code we’ve reviewed. The “75/55” label is best understood as imprecise summary of “the day-count threshold varies by state — check yours.” If that’s the substance, the label is doing more harm than good because it implies a specific federal rule that doesn’t exist.

The codified rules that DO matter

If you came here looking for “the rule” governing your STR’s federal tax treatment, here’s what to read instead:

1. The 7-day rule — Treasury Reg. §1.469-1T(e)(3)(ii)

When the average period of customer use of a rental is 7 days or fewer, the activity is not automatically classified as a rental activity for passive-loss purposes. Combined with material participation, this can reclassify losses as non-passive — letting them offset W-2 wages, 1099 income, and other active income. This is the rule most STR investors care about because it’s the gateway to the “STR loophole.” Full breakdown: STR tax rules explained.

2. The 14-day Augusta rule — IRC §280A(g)

Rent out a dwelling you use as a personal residence for 14 days or fewer in a year, and the rental income is excluded from gross income entirely. No reporting, no Schedule E. This applies to occasional rentals of your actual home — not commercial STRs. Full breakdown: Augusta rule guide.

3. Material participation — Treasury Reg. §1.469-5T

A set of seven specific tests under §1.469-5T(a)(1)–(7). You only need to meet one. The two most STR owners use are (a) 500+ hours in the activity, or (b) more than 100 hours and more than anyone else (including cleaners, managers, contractors). This is what unlocks non-passive treatment when combined with the 7-day rule. Full breakdown: Material participation for STR owners.

These three rules — not the “75/55 rule” — are what your CPA actually files against.

How to handle “rule” labels in investor content

Here is the heuristic that protects you from informal-rule confusion:

1. If the rule has a specific IRC section or Treasury Reg cite, it’s real. Examples: 7-day rule (§1.469-1T), Augusta rule (§280A(g)), 500-hour test (§1.469-5T(a)(1)).
2. If the rule comes with only a number and no citation, it’s probably informal shorthand. Examples: “the 80/20 rule,” “the 75/55 rule,” “the 25% rule.” These may map to something real, but the label itself isn’t a statute.
3. If a state-tax topic is being discussed, check the state’s department of revenue website directly. State transient occupancy rules vary widely; secondhand summaries age quickly because legislatures change thresholds.

The fastest way to lose money on STR tax strategy is to act on a “rule” you read on a forum without verifying the underlying statute. Your CPA does not file Form 8582 against a numbered investor-forum rule; they file against the actual code.

Related reading

• STR tax rules explained — 7-day, 14-day, substantial services
• Material participation for STR owners — the 7 IRS tests
• How high-income W-2 earners offset $150K+ salaries with STR cost seg
• STR material participation log — template + example
• Augusta rule — rent your home 14 days tax-free