New AirBnB’er.. question with schedule c and tax benefits

8 Replies

Hi All! Still trying to lock down a tax pro who is familiar with the STR strategies, but in the mean time- I've got some questions. I just started my AirBnB, it's a full time investment property. According to most everything I've read, I'll be filing schedule c on taxes. It is my understanding that I will not be subject to self-employment taxes because I don't think I offer any substantial services... Still not sure about that one.

With that being said, we just finished the rehab and furnishing.  I’ll have a couple bookings this month, but tax year 2019 will be a huge loss with all the expenses.  Will I be able to deduct the loss against my main source of income? As I understand, schedule c is active income not passive, so if I am able to deduct losses from this AirBnB against other income AND not pay self employment taxes, that would be great!  Any help on the subject is greatly appreciated! 

@Matt Lenzi Ask 100 CPAs and you'll get 50 on schedule E and 50 on Schedule C. First lets answer the big question. What's the difference? 

Schedule C: Self Employment (1099)

Schedule E: Rental Income or Loss

More often than not a STR is a little of both.

I greatly depends on how you're running this business. The more it is like a hotel, the more taxes you'll pay. 

 If you're cooking them breakfast and turning the sheets every morning that would be Schedule C. If you're not... schedule E. If you're average stay is 7 days or less that's Schedule C. Yes you will be getting a 1099 from Airbng. As you can see, it's a bit of a gray area. 

Do some googling and search BP where you will find this topic discussed many many times. 

Keep in mind Schedule C (1099/self employment) is a much higher tax to pay. So.... perhaps if you can get away without turning the sheets every morning you'll be building more long term wealth! 

I'm pretty sure schedule C is correct.

No self employment taxes unless you are really running a BNB.

I don't think you can take losses against W2 income, but you CPA should keep track of the losses to use in the future. If you are designated as a real estate professional then different rules apply.

@Lucas Carl Ha!  I kind of figured that.  It seems to be the case so far.  Part of my reasoning for Schedule C is the active vs passive.  I could be completely confused on all of this, but if I can deduct the huge loss from the airbnb this year off my other income sources, it would help out tremendously!  

@John Underwood . Thanks John-  I’m definitely not offering anything extra, but we do obviously clean / turn the sheets after each guest’s stay.  And we fall under the less than 7 day avg rental for sure.  I usually try to take a stab at doing my own taxes, but maybe I’ll find a CPA this year.  I’ll do some digging on whether I can deduct those losses against  other income (not a designated real estate pro, but my wife is thinking of getting her real estate license).   I do remember reading about carrying the loss to future years but I thought that was for passive income only.  

Originally posted by @Matt Lenzi :

Hi All! Still trying to lock down a tax pro who is familiar with the STR strategies, but in the mean time- I've got some questions. I just started my AirBnB, it's a full time investment property. According to most everything I've read, I'll be filing schedule c on taxes. It is my understanding that I will not be subject to self-employment taxes because I don't think I offer any substantial services... Still not sure about that one.

With that being said, we just finished the rehab and furnishing.  I’ll have a couple bookings this month, but tax year 2019 will be a huge loss with all the expenses.  Will I be able to deduct the loss against my main source of income? As I understand, schedule c is active income not passive, so if I am able to deduct losses from this AirBnB against other income AND not pay self employment taxes, that would be great!  Any help on the subject is greatly appreciated! 

If I were you, I'd hire an experienced real estate CPA such as @Daniel Hyman

Read these books 

I think you might like this book – "Every Landlord's Tax Deduction Guide" by Stephen Fishman.

Start reading it for free: http://a.co/bUItFza

I think you might like this book – "Every Airbnb Host's Tax Guide : Airbnb, HomeAway, VRBO and More" by Stephen Fishman.

Start reading it for free: http://a.co/76uPfL0

I think you might like this book – "The Book on Managing Rental Properties: A Proven System for Finding, Screening, and Managing Tenants With Fewer Headaches and Maximum Profit" by Brandon Turner, Heather Turner.

Start reading it for free: http://a.co/6iogF09