Ramifications of switching to a Schedule E this year after having filed a Schedule C last year for my vacation rentals?

Forum|Forum|7 years ago
June 1, 2019
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I filed a schedule C last year for my vacation rental business. (I rent homes from other people and turn them into Airbnbs for profit) This year, after crunching the numbers in both the schedule C & schedule E, it is apparent that I would pay less taxes if I were to file it as a schedule E. I have items & improvements that I'm still depreciating over time for and haven't nearly depreciated those assets in full yet.

1. What are the ramifications of stopping the schedule c this year and to file the same business as a schedule e instead?

2. How can I carry my assets over so that I can continue to depreciate them?

3. Is this considered to be a "red flag" with the IRS?

TurboTax Home & Biz Mac

Hal_Al

Employee

It's not optional. If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C

References: https://taxmap.irs.gov/taxmap/pubs/p527-007.htm

https://www.sapling.com/7364101/schedule-vs-schedule-rental-income

To me, it's sounds like Sch C is correct, for you.

Yes, it will probably be a red flag; particularly if you go back and amend the last 3 years (as you should, if sch E is correct).

As to assets, you re-enter each asset. On of the questions on set up is to enter prior depreciation taken (TurboTax calculates it and gives you a chance to change it)