Author Topic: Short Term Rentals - What can I deduct?  (Read 254 times)

rothwem

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Short Term Rentals - What can I deduct?
« on: August 09, 2020, 07:22:11 AM »
Our house is well laid out to have a short term rental in the basement, with two exits, and we live in a great place for people to vacation. We were thinking about throwing $10-12,000 into making the basement an Airbnb. The basement is already semi-finished (painted paneling on the walls, LVP on the floor, drywall ceiling, climate control, a half bath). Basically all we need to do is extend the bathroom wall out a bit to add a shower, then put a kitchenette/sink just outside of the bathroom.

The question is, if we spend the money to do this renovation, what can we depreciate on our taxes? Weíre planning on just having it rented in the weekends, and weíre already more than halfway through the year.

I know that with normal long term rentals, itís common to list a non-renovated property before itís even ready, just to start the clock so that renovations count towards the rental business, is that the same with the short term stuff too?

Papa bear

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Re: Short Term Rentals - What can I deduct?
« Reply #1 on: August 09, 2020, 07:45:10 AM »
I donít have short term rentals in my house so I canít answer off the top of my head. But hereís where you should go for guidance:


https://www.irs.gov/pub/irs-pdf/p527.pdf


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waltworks

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Re: Short Term Rentals - What can I deduct?
« Reply #2 on: August 09, 2020, 11:38:37 AM »
Figure out the value of the structure (whole house) vs the land, first, if you haven't already. County assessor can help with that.

Then take the square footage being rented out and figure out what percentage of the house it is. That will be the portion that you can depreciate. For the first year, it'll be a part-year thing that is just prorated by the portion of the year it was used as a rental.

-W

rothwem

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Re: Short Term Rentals - What can I deduct?
« Reply #3 on: August 10, 2020, 04:32:05 AM »
I donít have short term rentals in my house so I canít answer off the top of my head. But hereís where you should go for guidance:


https://www.irs.gov/pub/irs-pdf/p527.pdf


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Papa bear, thatís super helpful. I found the rentals section on the IRS website, but that PDF is way more detailed.

So to summarizeóI canít write off a whole lot haha. Especially not the renovations I did to get the place ready to rent.