I'm switching from a rental (schedule E) to airbnb schedule C. Remodeled in between same year. Start up costs? Or depreciation? Can I put it all on Schedule C?

[bodhicitta11]

Renting out  house (schedule E) for last 23 years.   Tenants moved out May 2016, left it trashed.  Major remodel for 3 months (kitchen, bath, new windows).  Then switched it to an AirBnb (this is in AZ where they treat Airbnb as motel) so I also want to switch to Schedule C starting 9/1.  Question is can I deduct the remodel under the Schedule C?  Can it be assets depreciated or do I put in start up costs?  House was not habitable during the 3 months it was being remodeled.

[bodhicitta11]

I have not lived in this house at all for past 23 years so no personal use.  I don't plan to live in it in the near future.  Given it is a tourist area and judging by the bookings for first quarter of 2017, I will make a profit in 2017 and triple the income I would have made as regular rental.  I am hoping to have at least some tax advantage in being able to deduct either special depreciation (items under 2500) or long term depreciation over next coming years.

[NancyG]

Rental activity for Airbnb may be reported in two different areas of your tax return, for specific reasons, and with different outcomes. Please review this article for a discussion of these options so you may choose the most appropriate place to report this on your return: http://www.nolo.com/legal-encyclopedia/tax-issues-when-renting-your-home-airbnb-vrbo.html

Most taxpayers chose to report Airbnb rental activity on Schedule E. If this applies to you, start under Wages & Income >> Rental Properties (or search for "Schedule E") and follow these instructions:  Where do I enter income and expenses from a rental property?

If you provide services to your guests and choose to report your income from Airbnb as self-employment on Schedule C, you may be able to use Schedule C-EZ in the Deluxe and Premier versions of TurboTax Online. 

[bodhicitta11]

Thank you, but I've already determined I'm going to use Schedule C for the airbnb.  I'm asking if I can have the start date for the airbnb business during the period I was repairing past regular rental damage as well as remodeling the kitchen and bathroom. This affects whether I can actually deduct everything I did.  And I was trying to understand whether that goes in start up costs or if I can just say the business started from the day I began to shift it to airbnb (opened bank account for it, started my business license for it then, hired contractor)  I did actually have  airbnb income for the last 2 months of 2016

[NancyG]

Generally business "starts" when it first starts advertising and is ready to serve customers. A business can start when it begins advertising, even though no sales have been made. So, taking a company website live on the Internet can be the date when that business starts.

[Cattlerancher]

All of your repairs and remodeling cost would be added to your cost basis of the airbnb. No expenses or depreciation would be taken until you begin advertising and are ready to serve customers. This rule is the same whether you report income and expenses on schedule C or E.
One addition note; Be aware that if switching to a schedule C business, your profits over $400 will be taxed with an additional 15.3% SE tax. One advantage though is the airbnb "may" qualify for 15 yr recovery period and sec179 or Special Depreciation Allowance. If not, you would use 39 yr instead of 27.5 as in a rental.