Short term rental tax planning

9 Replies

Hey BP,

I have converted a couple long term rental units to short term in 2017 and plan to convert several more in 2018.  I was hoping to get in touch with a CPA to work on some tax planning for 2018 as well as get a better handle on 2017.  I am in Atlanta, GA but haven’t come across any knowledgeable resources yet, any recommendations would be greatly appreciated.  

Thanks in advance,

Steve Nemeth

Originally posted by @Stephan Nemeth :

Hey BP,

I have converted a couple long term rental units to short term in 2017 and plan to convert several more in 2018.  I was hoping to get in touch with a CPA to work on some tax planning for 2018 as well as get a better handle on 2017.  I am in Atlanta, GA but haven’t come across any knowledgeable resources yet, any recommendations would be greatly appreciated.  

Thanks in advance,

Steve Nemeth

I could recommend Roc Hayslip in Atlanta. As well as Michael Silver, at Hermansilvercpas.com

It's pretty straightforward accounting.  Depreciate the cost of the house straight-line over 20 years and expense everything else in the current year.  One thing my accountant does is deduct for gas/mileage on my work vehicle.  $6000/year.

Thanks Yonah, I’ll reach out to the guys you’ve recommended.  Thanks for the response as well Paul, my concerns are not necessarily around depreciation (I’m pretty sure that buildings are depreciated over 27.5 years opposed to 20 years) or other deductions that are typical to long term rentals but rather tax guidance that dictates what is a schedule E rental portfolio vs. a schedule C business similar to hotels.  This classification seems to be in a bit of a gray area as I am having trouble finding consistent guidance as well as an idea of what is typically enforced both on a federal and local level.

@Stephen Kunen

Providing substantial services to your hosts provide suggestions that you should report it as schedule C as opposed to schedule E.

Substantial services include but not limited to
Concierge, meals, housekeeping, cleaning, entertainment etc.

A pro of reporting it on schedule C is that losses are deductible and not subject to passive activity rules
A con is that income will also be subject to self-employment taxes in addition to income taxes.

anything under 7 days average is schedule C if your CPA tells you otherwise get a differen't CPA. You should be paying self employment tax.  Call 30 CPA's and ask them if they've ever worked with a 1099 from airbnb. If no one says yes, call 30 more. 

@Stephan Nemeth Whether it is a Schedule C business rather than a Schedule E rental depends on the average length of the rental as well as the services you would provide.

From what I was able to find; 7 days or less is automatically schedule C, 9-30 days is dependent on what services are provided, and 30 plus days are schedule E.  Granted I have come across several contradicting positions as well.  Where my specific situation gets a little more confusing is that I have multi family units where there is a mix of longterm tenants and short term so I wasn’t sure if there is a tipping point where everything becomes schedule C vs. E or if I should just allocate expenses and income and do both.  Probably some gray area here but I am not sure.

I am trying to answer the schedule E vs C question for myself as well. The IRS guidance I have found refers to "substantial services". Where is the 7 days or less guidance coming from with the IRS literature?

@Nick Katsikis The source is the Temporary Regs to Section 469 of the Internal Revenue Code.

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