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Investors & landlords
might actually be reported on schedule C because with a B & B you render personal services which may subject you to se taxes.
Tax Issues When Operating a Bed and Breakfast or Hotel
In some cases, renting out all or part of your house or apartment can be classified for tax purposes as the equivalent of running a bed and breakfast or hotel. This will be the case if you dedicate a room or rooms in your home solely for the use of paying customers and never personally live in such rooms. You’ll also be classified as running a hotel business if you provide substantial services that are primarily for your guest’s convenience, such as regular cleaning, changing linen, or maid service during their stay.
In this event, your rental activity will be treated as a business for tax purposes. This means you’ll have to pay both federal income and self-employment (Social Security and Medicare ) taxes on your rental income, which will increase your tax burden. On the other hand, the restrictions on your deductions described above won’t apply, except that there may still be limits on any annual losses you’re allowed to deduct. Ordinarily, you’ll report your rental income and expenses on Schedule C (Form 1040), Profit or Loss from Business.