AirBnb Schedule C

[Burke]

I have a client who has filed a Schedule C for several years for Airbnb rentals. Last year, he rented out only 8 days, and the IRS rules say the rental income does not have to be reported in this case. Nor would deductions be taken. My software, however, is carrying forward the depreciation (OIH, etc) from the prior year. Should I just delete the Schedule C for this year? No 1099 was received. The client said they don't send one unless it is over $2K.

[Rapid Robert]

I have a client who has filed a Schedule C for several years for Airbnb rentals. Last year, he rented out only 8 days, and the IRS rules say the rental income does not have to be reported in this case. Nor would deductions be taken. My software, however, is carrying forward the depreciation (OIH, etc) from the prior year. Should I just delete the Schedule C for this year? No 1099 was received. The client said they don't send one unless it is over $2K.

I think you are trying to apply a rule for rentals (dwelling used as a home and rented for less than 15 days) to a business activity, and I don't think that is correct, but don't have time to research the code. If it is truly a Schedule C activity with a profit motive, then yes you would continue the Schedule C including current year depreciation. The question then becomes, is it truly a for-profit business activity? (the nine attributes of a for-profit business and all that).

I wonder if Schedule C was the correct choice in the first place. Was the taxpayer providing substantial services, or perhaps was simply vacating the premises while the renters were there? (yes technically it could still be reported on Schedule C as a non-passive activity and no SE tax, but Schedule E is easier to use for the same purpose).

In the end, if you still take the position that this is a Schedule C business, then I'd report all the income and expenses, since the less-than-15-day rule does not apply to business as far as I know.

As for your software, if you determine not to include Schedule C, then yes you either will have to delete it, or mark it as inactive if your software supports that feature.

[Burke]

I wonder if Schedule C was the correct choice in the first place. Was the taxpayer providing substantial services, or perhaps was simply vacating the premises while the renters were there? (yes technically it could still be reported on Schedule C as a passive activity and no SE tax, but Schedule E is easier to use for the same purpose).
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Yes, he was providing substantial services, i.e, meals, cleaning, toiletries, concierge services, etc. And was doing quite well on the net income. I think when the locality started charging room taxes (and back taxes for 3 years on the income on which he had not paid them) it lost its luster. He was living there the whole time it was rented (7 days or less for each rental) as it is his personal residence. All the research I have done indicates it is subject to SE tax. See this link: https://www.taxpros.org/blog/short-t...reatment/41678. Especially the last paragraph on Profit & Losses on Schedule C.

[Rapid Robert]

All the research I have done indicates it is subject to SE tax. See this link: https://www.taxpros.org/blog/short-t...reatment/41678. Especially the last paragraph on Profit & Losses on Schedule C.

Yes, if it is a regular Sched C business then it would be subject to SE tax. To repeat, I don't think the less-than-15-day rule applies in this case, because it's not a rental activity, it's a business. YMMV.

What I was referring to with my previous comment on Schedule C/passive/no SE tax was the confusion that sometimes exists regarding the difference between passive activities, and activities subject to SE. Two different code sections. I meant that technically, a rental with average stays of 7 days or less is classified as non-passive, but still is not automatically subject to SE just because of that. One conclusion is to force the square peg into the round hole and report on Schedule C. Anyway, none of this paragraph seems to apply in your case.

[Burke]

I see what you are saying about the 15-day rule and it not applying in this case. But since it does qualify as a Sche C business due to the less than 7-day rule, I am thinking the income should be reported and deductions taken. There is no way he puts in 500 hours per year or is considered a real estate professional. He works a full-time job elsewhere. This may produce a loss, which according to the last paragraph mentioned will be treated as passive and not deductible, but carried forward to future years. Agree? (PS: What does YMMV mean?)

[JohnH]

YMMV = Your Mileage May Vary (usually)

[John of PA]

If you decide to omit it for this year only, most software has a box to check to omit the schedule from the current year return only, so it is still there for future years.