Airbnb Schedule C Property and Improvement Depreciation

Forum|Forum|3 years ago
February 22, 2023
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So I just want to check a few things to make sure I am going in the right direction. I have an airbnb that classifies as a Schedule C according to the 2022 IRS instructions. So to do depreciation for a Schedule C Property and Improvements I go to "Wages & Income" > "Self-employment income and expenses" and I do depreciation under "Assets" is that correct?

For the property it will be classified as "J1 - Nonresidential" and will depreciate over the next "39 years" correct?

For property improvements it will be classified as "J5- Qualified improvements" it can depreciate over the next "15 years" or I can do a Section 179 correct?

So assuming that is all correct, I am a bit confused on the depreciation results. For example, if I type $15,000 for "J5- Qualified improvements" and select to spread the deduction over 15 years, it only deducts $500 (increases my refund by $60 [12% of $500] which is only half what it should be, however if I take do a 179 it deducts the full $15,000 (increases my refund by $1,800 [12% of 15,000]. Why is that?

Having a similar issue with the "J1 - Nonresidential". For example, if I paid $100,000 it for some reason is depreciating at $1603 or $62,517 over 39 years. I am confused

One last question, if I do a section 179 or a 15 year spread on the improvements for last year, and this year the property turns into a long term rental or a schedule E, will that complicate things for 2023 tax return?

TurboTax Self Employed Online

Best answer by Vanessa A

Yes, you are correct. This would not be a rental activity since your customers are only staying an average of 5 nights. Instead, you will want to report your income on Schedule C as self-employment income. The property would be a business asset and depreciated as a hotel would be depreciated.

You will enter your income from your AirBnB activity in the business section of TurboTax as a business. You will also be subject to Self-Employment taxes on this income.

RobertB4444

In the year that you start to depreciate an asset you only get a part year depreciation beginning on the date that you put it into service. So your first year depreciation is not representative of the whole.

Structural improvements should be entered as residential rental real estate. As should your property itself.

@BHancock

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BHancockAuthor

So according to: https://www.irs.gov/publications/p925

Under section "Rental Activities"

"Exceptions.

1. Your activity isn’t a rental activity if any of the following apply.
The average period of customer use of the property is 7 days or less."

This statement is true for me as my customers stayed an average of 5 days, so I report this property as Schedule C and as a non residential property for depreciation since its technically a hotel and not a residential rental property... it's a commercial property. Is this correct?

@RobertB4444

Vanessa AAnswer

You will enter your income from your AirBnB activity in the business section of TurboTax as a business. You will also be subject to Self-Employment taxes on this income.

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