So if you have two Airbnb bookings for $1,000 each and one cancels, you receive an IRS form 1099-K for $2,000 in box 1a.
One of the $1,000 bookings was refunded by Airbnb yet the income is passed on through the IRS form 1099-K.
You are correct. The amount passed on as income which you did not receive should be expensed within the Schedule E rental activity to make you whole.
As you described, use a specific expense classification and maintain a record of the transaction within your tax return papers should a tax authority question the entry at a later time.
@heimanjj
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