If you earn income through Airbnb or another short-term rental platform, you'll typically report that income on either Schedule C (Profit or Loss From Business) or Schedule E (Supplemental Income and Loss). Which schedule you use depends on the services you provide and how the property is rented. Fortunately, the reporting process is straightforward once you determine whether your activity is considered a rental activity or a business.
Should I Use Schedule C or Schedule E?
The first step is determining where your Airbnb income belongs on your tax return.
Schedule C: Business Income
Generally, report your Airbnb activity on Schedule C if either of the following applies:
-
You provide substantial services to your guests, such as:
- Meals
- Daily cleaning
- Concierge services
- Organized activities or transportation
- The average rental period is 7 days or less.
When these conditions exist, the IRS typically treats the activity as a business rather than a passive rental activity.
Schedule E: Rental Income
Generally, report Airbnb income on Schedule E if:
- You do not provide substantial services, and
- The activity is primarily the rental of property.
This is often the case when you provide standard accommodations but do not offer hotel-like services.
Examples include:
- Renting a room in your home
- Renting a vacation property
- Renting a house, condo, or apartment without substantial guest services
How Do I Enter Airbnb Income in the Program?
Depending on your situation, go to:
- Federal
- Income (Select My Forms)
Then select either:
- Profit or Loss From Business (Schedule C), or
- Profit or Loss From Rentals and Royalties (Schedule E)
Enter your rental income and any related expenses in the appropriate section.
What If I Rented My Home for Fewer Than 15 Days?
The IRS provides a special rule for homeowners who rent out their residence for a very short period.
If:
- You used the property as a residence, and
- You rented it for fewer than 15 days during the year,
then:
- You do not report the rental income, and
- You cannot deduct rental expenses associated with that income.
This rule is sometimes referred to as the "14-day rule."
If you own other rental properties that don't qualify for this exception, report those properties normally.
How Do I Calculate Deductible Expenses?
If you use a property for both personal and rental purposes, you must allocate expenses between personal use and rental use.
In general, rental expenses are calculated using:
Rental Days ÷ Total Days Used During the Year
The resulting percentage determines how much of your expenses may be allocated to the rental activity.
Example
Suppose:
- Property rented at fair rental value: 55 days
- Total days used during the year: 365
Calculation:
55 ÷ 365 = 15.06%
Your deductible rental expenses would generally be limited to approximately 15.06% of eligible expenses.
Only the rental portion is deductible on Schedule E. Certain personal expenses may still qualify elsewhere on your return, such as itemized deductions if you qualify.
What If I Only Rent Out One Room or Part of My Home?
Many Airbnb hosts rent only a room or a portion of their home rather than the entire property.
When this happens, expenses generally must be allocated based on the portion of the home used for rental purposes.
Separate Dwelling Unit
If the rental area contains all of the basic living facilities, including:
- Sleeping space
- Bathroom facilities
- Cooking facilities
the area may be considered a separate dwelling unit.
Example
You own a home with a detached loft apartment that includes:
- A bedroom
- A bathroom
- A kitchen
Because it contains all essential living facilities, it can be treated as a separate dwelling unit. In that case, you'll generally use the rental-versus-personal-use day calculations discussed above.
What If the Rented Room Is Not a Separate Dwelling Unit?
If:
- You rent only part of your home,
- The area does not contain all the facilities required to be a separate dwelling unit, and
- You have no personal use of the rented area during the year,
you'll generally allocate expenses based on square footage instead of days rented.
Example
Suppose:
- Total home size: 1,200 square feet
- Rented room size: 250 square feet
Calculation:
250 ÷ 1,200 = 20.8%
Your business-use percentage would be approximately 20.8%.
You could generally allocate qualifying expenses such as:
- Mortgage interest
- Property taxes
- Utilities
- Insurance
- Repairs affecting the entire home
based on that percentage.
Common Airbnb Expenses You May Be Able to Deduct
Depending on your reporting method and circumstances, deductible expenses may include:
- Cleaning fees
- Advertising and listing fees
- Airbnb platform fees
- Utilities
- Insurance
- Property taxes
- Mortgage interest
- Maintenance and repairs
- Supplies provided to guests
- Depreciation
- Professional and management fees
If the property has personal use, remember that only the rental portion is generally deductible.