How to calculate personal vs rent use ratio for a room I rent out on Airbnb to deduct expenses? I first listed the room on April,14, but it was occupied not all the time?

[a_tom-v]

During period from April, 14 to December 31: 155 days the bedroom was rented out, 26 days - available for booking but not booked; 85 – not available for booking. We blocked these 85 days on Airbnb calendar when we would be out of town, or needed extra time for preparing the room for next guests as we work full-time jobs. We don't use the bedroom for personal use and it was just empty when we were not renting in out, neither before April, 14 nor after. 

What percentage of expenses I can deduct?

[Carl]

Basically, you are running a B&B since you do "provide services" to your tenants. (Or you would, if you actually had a tenant in 2017). Overall this would be claimed on SCH C as business income, the same as a hotel would. However, since you have no rental income for 2017, it makes no sense to claim squat on the 2017 return, since your expenses can only be deducted from the business income (which you do not have).

You "may" need to check with any authority within your local jurisdiction too, to ensure you're meeting the requirements (if any) that may be imposed on what is classified as "short term rentals". I know in my city if within the city limits, the city imposes a $3 "bed tax" that I have to pay to the city for each night a bed is occupied by a paying customer. Thankfully, I'm not within the city limits.

[a_tom-v]

Carl, thank you for the answer. I'm sorry, probably my question was not clear, I edited it and I hope now you can better understand what I mean. I actually did have guests and the room was occupied for 155 days as I explained in additional details under the question.

"During period from April, 14 to December 31: 155 days the bedroom was rented out, 26 days - available for booking but not booked; 85 – not available for booking. We blocked these 85 days on Airbnb calendar when we would be out of town, or needed extra time for preparing the room for next guests as we work full-time jobs. We don't use the bedroom for personal use and it was just empty when we were not renting in out, neither before April, 14 nor after. 
What percentage of expenses I can deduct?"

Appreciate your answer.

[Carl]

Personally, I think you have a SCH C business. I don't know how to deal with that for your specific situation. But assuming you want to report it on SCH E:
You work this through the Rentals & Royalty Income (SCH E) section of the program. Read the screens now, as the small print really does matter, big time. Some screens say select the one that applies. Others say select "ALL" that apply. It matters.
Towards the beginning you'll have a selection for "I rented out part of my home" and you will select that.
Later when asked, you'll enter the square footage of your entire home, and the square footage of the space you rent that is (this is important now) "exclusive to the renter". You'll be asked for lots of other stuff too, which for the most part is self-explanatory. So I'm not going into that here.
When in the expenses section you will have two types of expenses. There's "whole house" expenses, and then there's "rental portion only" expenses. It is NOT common to have expenses for the rental portion only. So chances are you'll have zeros for all that.
Note that there are several things to be aware of when reporting this on SCH E
 - You will not pay self-employment taxes on the rental income
 - You will not be contributing to your social security account or Medicare. (Which is basically what the SE tax is.)
 - You can NOT count the income when figuring the percentage of your income to deposit in a qualified/tax deferred retirement account (including ROTH).
For timeframes, the date of conversion is the last day you used the space for your personal use.
The "in service" date is the first day the space was "available for rent".
"The "number of days rented" includes periods of vacancy between tenants *PROVIDED* you did not use that space for personal use for even one single day while it was vacant.
Number of days of personal use is ZERO provided you did not use it for personal use for one single day *during the period of time the space was classified as rental space.* Days of personal use before you converted that space to rental space, flat out do not count for anything.

[a_tom-v]

Thanks a lot Carl! So what would be disadvantages of reporting on Sch C? As I know in some states the Airbnb income would be subject for extra hotel taxes if I report on Sch C... I have not much knowledge about that tough. Do you know by any chance where I could find more information about the subject?

And another question, if you don't mind. Would it make any sense to bother calculating depreciation for a bedroom? am I allowed to do that at all?

Thank you for you help!

[Carl]

When it comes to depreciation, you don't have a choice. If you don't depreciate, then later when  you sell the property you *have* to reduce your cost basis by the depreciation you *should* have taken. So you're gonna lose either way. Depreciate the property and be done with it. (The program will pro-rate depreciation for the rental percentage.)
Now for the SCH C side of things, I need to know what state and county you are in. Also, if in a city, are you in the city limits? If so, what city? We'll check on line to see if any taxing authorities whose jurisdiction you fall under, have any special requirements for a B&B.
I know in my city (thankfully, I'm not in the city limits) if I rent space or a unit out for less than 30 days for *any one period* during the year, then it's considered the equivalent of a hotel for the *entire* year, and I would be subject to the bed tax for every single night rented during the year.

[kpphears]

a_tom.v is incorrect re. depreciation - if this is a Schedule C business (rather than Schedule E), which it sounds like it is, then you do have a choice - in any particular year you can choose to use the Simplified Option deduction at $5 per square foot (up to 300sf), instead of depreciation/utilities etc; by doing this you're no longer eligible to depreciate the area for that year, thus no depreciation recapture. The IRS is pretty clear on that. Also if you use the Simplified Option you still get to take the full Schedule A deductions for mortgage interest & property tax. <a rel="nofollow" target="_blank" href="https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-dedu...>

[Carl]

Ummmmm... rental space that is being rented out is not a home office any way you look at it. Doesn't matter if it's a SCH C business. The space rented to the tenant is not, in any way, form or fashion a home office. Therefore there is no choice. As you say, "the IRS is pretty clear on that". The website you reference uses both terms of "business use" and "home office". I'm highly confident the IRS would not consider space rented out to a tenant for even a short term SCH C business, to be a home office, or to qualify for the simplified method.
An AirB&B business reported on SCH C is treated basically the same way a hotel treats it in their business. Hotels don't and can't go take a simplified deduction for every single room they rent out.

[kpphears]

Carl, actually, AirBnB's own tax guide indicates that AirBnB's may be either Sched C or Sched E businesses, depending on the specifics. Also H&R Block has an AirBnB guide with a flowchart to help users decide whether their AirBnB is Sched C or E - and at least in my case it is 100% clear that it's Sched C.

As to whether the simplified method can be used - it's commonly called the home office deduction, but IRS language indicates any "qualified business use" of the home can use it - the question then is what exactly is a qualified use; I was under the impression that a B&B would qualify, but I guess I'll find out when I get my taxes back from my accountant shortly!

[Carl]

Either way, you still have to show the business use percentage of your home, be it SCH E or C. With SCH C, you'll be claiming the space being rented out as "home office", where as for SCH E you be reporting it as "I rent out a part of my primary residence".
The difference is that for the SCH E reporting there's no self-employment tax, meaning that not only do you not get credit to your social security and Medicare accounts, you also can't include that income when figuring your allowable IRA contributions.
Now with the SCH C, you "do" pay the additional SE tax, which is basically the employer side of your social security and Medicare account contributions, and you "can" include that income when figuring your maximum allowable contributions to an IRA account.
For some, and depending on what state they're in, it can sometimes be a hard call between SCH E or SCH C. But a very good basic rule of thumb is that, if you provide the tenant recurring services, then chances are, it's a qualified SCH C business.
But still, one has to look at state and local laws too. For example, in my county anything rented for 30 days or less for any one rental period during the tax year, is considered a short term rental for the entire year. Short term rentals in my county have to operate under the same state laws that a hotel does. So that makes it a SCH C business by local law, even if I don't provide recurring services. One reason for this county ordinance/law on this, is because hotels have to collect/pay a local "bed tax" of 3$ per person per night. So when the Bed & Breakfast's were "getting away with" not paying it because they used "rental contracts" (whereas hotels call it an "agreement"), the law/ordinance was redefined to make sure they were included.
Overall though, if you have guidance from a reliable source such as H&RB, then by all means utilize it, as I would in your shoes.