We have already had several clients come in with 1099’s from Airbnb so I want to make sure I am understanding the rules correctly.
I apologize in advance if we have already gone over this but a search did not turn up much helpful information.
Many factors affect how to properly report Airbnb/Short-term rental income including if the total number of rental days is less than 15 and if the home is used personally or only rented.
For this discussion I want to focus on a home being used as a primary residence with two rooms rented out exclusively and no personal use of the rental space. The rooms were rented for more than 14 days each. No extra-ordinary services were provided. Let’s say 1000 sq. ft total and 200 sq. ft rented.
If we add up the total days rented and divide by the number of tenants we get the average number of days rented per tenant. If this number is 7 days or less then the income and expenses must be reported on a schedule C. SE tax is due if there is a profit. If there is a loss then we must look at the material participation rules - the active participation standard and the $25,000 allowance do not apply as they would with a typical rental property.
Is this a correct interpretation of the law?
I appreciate any thoughts on this.
I found this IRS audit guide helpful:
https://www.irs.gov/Businesses/Small-Bu ... tal-Losses