Depending on how you
run your Airbnb business, you have to report your income on either Schedule C or schedule E. The
distinction is based on how actively you are involved in running your Airbnb
business and what services you offer.
Schedule E is meant
for passive income. If you are just renting out a space and you do not offer
any additional services (cooking, cleaning services, maid service etc) then you
should report on Schedule E.
If you do provide
services, like a hotel or B&B would, then you report on Schedule C.
The main difference
between these schedules is that under Schedule C you are subject to
self-employment tax and under Schedule E you are most likely subject to Passive
Activity Loss Limitations, which means that your rental deductions cannot
exceed your rental income. In other words, the IRS assumes you’re never running
at a loss. If you’re not, then you can deduct up to $25,000 regardless of your
income.
Once you determine
which schedule applies to your situation, follow these steps in Turbo Tax:
Log
into your tax return. Use the search box in the upper right hand corner. Type
in "Schedule C (or Schedule E" in the box. This will bring up the
"Jump to Schedule C (or Schedule E)" link...click that link. From
here Turbo Tax will ask you some specific questions about your business. You'll
also be taken to a screen to enter you income. Finally, Turbo Tax will bring
you to the screen for you to choose what expenses you would like to enter onto
your tax return.
If you find that you operated your AirBnB as a business (Schedule C) than a rental activity (Schedule E) you will have to upgrade from the Turbo Tax Premier version to the Turbo Tax Self Employed version. The Premier version does not support the income and expenses of a business (Schedule C). However, the opposite is not true if it is a rental activity. An upgrade is not necessary in that situation.
