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Old 11-01-2017, 05:53 PM
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Arrow AirBnB Rental in 1/2 of property. What can I deduct?

Hello,

here's my situation: I live in a house and rent rooms on AirBnB. What can I deduct?

1) I live in 1/2 of the house (sqft). However it is only 1 bedroom: I rent 3 bedrooms on AirBnB. My research told me to split common bills on tax return either per sqft or per bedroom. Do I get to chose? (If yes, the bedroom split is much more in my favor). Bills I can think of in this category: Mortgage Interest, Insurance, Utilities, ...

2) I have consumable expenses (Shampoo, Towels, Sheets, ...). I believe I can deduct these, or am I mistaken?

3) What about other expenses such as furnitures, electronics, wall insulation, plumbing in the rented space? Does it fall into the 100% deductible (as in not divided per sqft/bedroom), amortized over X years category?

4) What about expenses such as retro-fitting the place to get it airbnb-ready (I had to add doors, buy keypad locks, smart thermostats, ...)

5) I do a lot of the work myself. Instead of having a contractor bill, I have receipts from the hardware store. Are tools & parts deductible?

6) Are there common deductions I am forgetting about? Not trying to be greedy, just getting a quick understanding of commonly deducted expenses that are often overseen.
Thinking of maybe: cell phone bill, home office space, gas used (this one is a stretch since I live on the property).

I am in California (not sure if that matters).

Thank you!



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Old 11-01-2017, 09:54 PM
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1) I live in 1/2 of the house (sqft). However it is only 1 bedroom: I rent 3 bedrooms on AirBnB. My research told me to split common bills on tax return either per sqft or per bedroom. Do I get to chose? (If yes, the bedroom split is much more in my favor). Bills I can think of in this category: Mortgage Interest, Insurance, Utilities, ...=====>>yes you can; whatever is convenient for you; However, there is a calculation to come up with the allocated portion of your rent and other corresponding household expenses you can offset (or "deduct") against this income. Simply put, you calculate the percentage of Airbnb use and multiply that against the allocated percentage of the space used ;alsoYou are allowed to deduct 100% of your direct rental expenses. These are expenses that apply only to renting, such as fees or commissions you pay to the rental agency, advertising, credit checks, insurance for the rental, cleaning costs, repairs solely for the rental portion of your home, and depreciation (limited to the rental portion of the home).so you need to calculate how much of the rent should be allocated to personal vs. business/rental. For rentals, also calculate the fair rental and personal use days.

2) I have consumable expenses (Shampoo, Towels, Sheets, ...). I believe I can deduct these, or am I mistaken?=>as part of misc expenses for rental purposes; the expenses need to be allocated to personal vs. business/rental.

3) What about other expenses such as furnitures, electronics, wall insulation, plumbing in the rented space? Does it fall into the 100% deductible (as in not divided per sqft/bedroom), amortized over X years category?===>> You can claim the costs for any repairs to the property or general maintenance. However, if you're doing the work yourself you can only claim for materials - not your time.If the work is more of an improvement than a repair then you can't claim the cost as an expense.The distinction between repairs and improvements can be tricky, especially if the property is a "leaky" property.If you're unsure whether work done on your property is repairs or maintenanceI suggest you talk to an Enrolled Agent/ a CPA doing taxes in your local area.


4) What about expenses such as retro-fitting the place to get it airbnb-ready (I had to add doors, buy keypad locks, smart thermostats, ...)====>as mentioned above;

5) I do a lot of the work myself. Instead of having a contractor bill, I have receipts from the hardware store. Are tools & parts deductible?==>yes of course however, if you're doing the work yourself you can only claim for materials - not your time

6) Are there common deductions I am forgetting about? Not trying to be greedy, just getting a quick understanding of commonly deducted expenses that are often overseen.
Thinking of maybe: cell phone bill, home office space, gas used (this one is a stretch since I live on the property).======>since you're living in a family home that was bought or transferred to a company which you own or control, you need to be very careful about claiming expenses. If in effect you're renting the property to yourself, we could view these claims as tax avoidance and you could face penalties, even prosecution. You can claim for motor vehicle expenses, such as running costs for travelling to inspect your property or to do repairs; You can claim the costs for any repairs to the property or general maintenance; You can't claim deductions for capital expenses, private expenses, or expenses that do not relate to your rental; The general rule is that you can only claim expenses as they relate to your rental activity. You can?t claim private living costs or capital expenses. Private living costs include your day-to-day costs, such as food, power or gas. Capital expenses include buying furniture for the room you rent out or the cost of improving your property. You can claim depreciation on capital expenses.Expenses you may be able to claim include electricity, gas, telephone and internet, insurance, or rates. If you are living in the house, these expenses will need to be apportioned.



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Old 11-01-2017, 10:13 PM
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Thank you for the detailed answer!

A couple questions if you don?t mind:
1) you mentioned deducting expenses such as parts from hardware store. Since I do the work myself, I had to buy tools to do it. Can I deduct that too?
2) you mentioned furniture is a capital expense. What about TVs/appliances/linen/sheets for the rental portion? Should I amortize all that over X years? Or is it not deductible at all?



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