Airbnb expenses but no income, YET

[lokilo]

I started doing AirBnB this year (2017), but spent a small (but significant) chunk of change in 2016 getting the room ready (new towels, linens, desk, etc.). Would I list it as an expense for Rental properties, but just list the income as 0, and those expenses will be carried over to tax year 2017?

[MargaretL · Accepted solution]

You can deduct your expenses if the room was available for rent (so you don't have to have it rented, but it must be available for rent... for example, you were already advertising it).  It's ok that you have no income. You can deduct the expenses, even if no rental income is reported, as long as the room was available for rent. 

If, however, the room was not available for rent... you cannot deduct the expenses on 2016 tax return.  All your expenses (except property taxes and mortgage interest if you have one) paid BEFORE the property was listed as available for rent are simply added to the cost of your rental property (in your records).  The total amount is called adjusted basis (not just the cost, but the cost plus all your pre-rental expenses).

Once the property is available for rent, you will start depreciating the rental and use the "adjusted basis" - the amount which includes your pre-rental expenses.

[lokilo]

Thank you! I kind of understand, and your answer just confirms that I need to have a real tax accountant now do my taxes for next year 🙂  (the room was not available for rent in Fall 2016).

[MargaretL]

LOL, you may be right... at least for the first year of the rental... The room must be available for rent at any time during 2016...if it was available in Dec...(prior to 2017) then you can deduct it...

[lokilo]

No, I started advertising in Feb 2017. Add to the room rental a regular W2 and a 1099 for dancing instruction on the side: it's time for a real CPA!