Generally if you rent out your entire home on a short-term basis, you will file under Schedule C; while those who rent out just a part of their home or who also have long-term tenants will file under Schedule E.
- Income (select my forms)
- Profit or Loss from Business (Reported on Schedule C) OR Profit or Loss from Rentals or Royalties (reported on Schedule E)
What if I rented my home for less than 15 days?
There is a special rule if you use your home as a residence and rent it out for fewer than 15 days. Under this special rule, you do not report any of the rental income and do not deduct any expenses as rental expenses.
If you have other properties that do not fall under this days rented rule, report as normal.
How do I calculate my expenses?
If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. In general, your rental expenses will be no more than your total expenses multiplied by a fraction, the denominator of which is the total number of days the dwelling unit is used (during the taxable year) and the numerator of which is the total number of days actually rented at a fair rental price.
Example: 55 days rented divided by 365 days total = 15.06% business use
Only your rental expenses may be deducted on Schedule E. Some of your personal expenses may be deductible on Schedule A if you itemize your deductions.
What if I only rent one room, or a portion of my home?
Airbnb has made it easier than ever to rent your home for some extra income. Through the popular app you can rent your entire home when you’re not using it, or even just rent out a single room or portion of the home.
If you only rent a portion of your home then all expenses relating to the home must be adjusted based on the square footage of the rental space.
If the rental portion of your home contains all basic needs such as sleeping space, toilet, and cooking facilities then it is still considered a dwelling unit.
Example: Your property contains a loft apartment. This apartment has its own bathroom, cooking, and sleeping arrangements. This portion is considered a separate dwelling unit and you will use the dwelling unit calculations above to determine your business use of this portion of the property.
If you have no personal use of the room and it is available for rental for the full year, and it does not have all the amenities required to be considered a separate dwelling unit, then it is not considered a dwelling unit. Instead of using the calculation above to prorate your expenses, prorate based on square footage instead.
Example: Your total home square footage is 1200 square feet. You rent out a portion of the home totaling 250 square feet. You do not have any personal use of the rented portion during the year, so your percentage will be: 250 divided by 1200 = 20.8% business use.