ADU Long Term Rental vs Airbnb tax write offs

2 Replies

Hello, 

I am a newer real estate investor from California. I have a question regarding the tax write offs of a long term rental vs an Airbnb rental.

I am just about finished converting my garage into an ADU for a total cost of about 60k(including appliances).

Based on my limited research it appears I will only be able to depreciate these costs over a 27.5 year period if I decided to make my ADU into a long term rental. On the other hand, per my understanding I should be able to deduct all construction and appliance costs if I were to rent this ADU out as an airbnb.

So long term rental would mean 60k/27.5 = $2181 in annual depreciation.

Airbnb Rental this year would mean 60k deduction at 24% tax bracket = $14'400 tax savings.

Am I correct in this line of thinking? Or would there be certain expenses that I would not be able to deduct from the construction cost of an AIRBNB rental.

Thank you in advance bigger pockets community.

State ADU rules do not allow an ADU to be used for STR. It is possible your local jurisdiction is more lenient, but it would be the first I have heard of.

Good luck

Originally posted by @Dan Heuschele :

State ADU rules do not allow an ADU to be used for STR. It is possible your local jurisdiction is more lenient, but it would be the first I have heard of.

Good luck

Thank you for that, just checked my local city of Long Beach and you are absolutely correct. I cannot operate my ADU as a short term rental.