"Schedule E" HELP for tax illiterate newbie!! :)

[Rebecca Cramer]

Hi friends! 

I am finally getting to my 2018 taxes and we bought our first short term vacation rental property in 2018. We have receipts galore and trying to fill out our "schedule E" and I have a lot of questions. Our CPA wants us to pay him $100/hour just to answer a few questions...so Im here asking you. Here we go:

1. Im so confused what category to put things like all the decor we bough for the house, pillows, plates, kayaks, paintings, coffee and tea,furniture, sheets, mattress, couch, everything we bought and continue to buy to make the property a vacation rental....there is the "supplies" category but I also heard some things go into the the depreciation category like furniture. But just confused where to put what...HELP!

2.Also, when we came up to stay in the location (Ocean City, Maryland) to look for houses and stayed in hotels and ate out can we deduct that as well in "travel" category? Is it 50% of food costs? Does that include the grocery store food we bought during those trips?

3.Also when we go to the property to do improvements. Can we deduct all the food costs 50%? Grocery store food?

4.Can we deduct loss of income when we stayed at the property to do improvements since we blocked time off and couldn't get rentals?

Any help would be so much appreciated! Thanks!!

Best Regards, Rebecca

[Deb Neumayer]

First of all let me say it might be time to get a new CPA. We live in Atlanta but have a super guy in NYC who does all our taxes and who would probably answer all your questions for free. If you'd like to friend and then message me, I could give you the contact information for this super star CPA, the best in the world in my opinion! :)

[Abhi Acharya]

@Ashish Acharya, please help Rebecca. 

[Ashish Acharya]

Originally posted by @Rebecca Cramer:

Hi friends! 

I am finally getting to my 2018 taxes and we bought our first short term vacation rental property in 2018. We have receipts galore and trying to fill out our "schedule E" and I have a lot of questions. Our CPA wants us to pay him $100/hour just to answer a few questions...so Im here asking you. Here we go:

1. Im so confused what category to put things like all the decor we bough for the house, pillows, plates, kayaks, paintings, coffee and tea,furniture, sheets, mattress, couch, everything we bought and continue to buy to make the property a vacation rental....there is the "supplies" category but I also heard some things go into the the depreciation category like furniture. But just confused where to put what...HELP!

2.Also, when we came up to stay in the location (Ocean City, Maryland) to look for houses and stayed in hotels and ate out can we deduct that as well in "travel" category? Is it 50% of food costs? Does that include the grocery store food we bought during those trips?

3.Also when we go to the property to do improvements. Can we deduct all the food costs 50%? Grocery store food?

4.Can we deduct loss of income when we stayed at the property to do improvements since we blocked time off and couldn't get rentals?

Any help would be so much appreciated! Thanks!!

Best Regards, Rebecca

Your CPA should handle all of these. If you want to learn how to do it, questions here are fine, but I would recommend having your CPA prepare your return as it get complicated as you can tell from your questions and my responses. 

Depending on the level of a service you provide for your short term rental, you might actually have to fill out a schedule C rather than E. You need to provide all the details to your CPA. Filling out the schedule C means that you will owe extra 15.3 % in a self-employment tax as the short term rental activity is no longer passive rental activity and you need to figure out if you meet the 7 material participation rules to figure out the passive nature of the involvement. The short term rentals of less than 7 days is not considered rental activity. IF you don't provide substantial service, you would still fill out Sch E and not pay SE taxes. I have seen other tax professionals miss this and subject the short term rental to SE taxes. That is not correct. Please give details to your CPA as you need to know bunch of IRC codes to make this right.  

1. Im so confused what category to put things like all the decor we bough for the house, pillows, plates, kayaks, paintings, coffee and tea,furniture, sheets, mattress, couch, everything we bought and continue to buy to make the property a vacation rental....there is the "supplies" category but I also heard some things go into the the depreciation category like furniture. But just confused where to put what...HELP!

- Yes, some of the assets like furniture will have to be capitalized and depreciated. (Remember that you can take 100% bonus depreciation) Depending on your expense amount, you can also elect to expense it under de minimis safe harbor. Expensing (vs depreciating) it under the safe harbor will prevent the depreciation recapture when you sell the property, if any. 

Supplies, Small tools and equipment, decor- all off these will work. And will be deductible when you used it. 

2.Also, when we came up to stay in the location (Ocean City, Maryland) to look for houses and stayed in hotels and ate out can we deduct that as well in "travel" category? Is it 50% of food costs? Does that include the grocery store food we bought during those trips?

- You cannot expense that you incurred when you were looking for houses. Once you identified a specific house, the expense(travel and such) incurred to acquire the house will be added to the basis of the house and depreciated. Again, there are specific rule that need to follow, which you CPA should help you with. 

3.Also when we go to the property to do improvements. Can we deduct all the food costs 50%? Grocery store food?

- If your travel was for the repair of the house, yes you can deduct the travel, lodging(overnight travel outside of your home city), meals (50%). These are general assumption, again need to be discussed in detail with your CPA. 

I know that OC is vacation spot, make sure you have enough documentation to prove that your travel to OC was to repair your property. Majority of the day must be spent working on the property. Again there are rules for this, your CPA should fill you in or do it for you. 

[Chris Barczewski]

To follow up on this older post:  

Ashish, thanks for that great answer.  In number 3 is travel reimbursable for only the person doing the repairs?  Say if I travel with my Wife and children to our Short Term vacation Rental, and both my wife and I are putting in the required time per day to qualify, do we deduct travel for just the two of us or can we deduct for the whole family having to be there?  Thanks very much.