My wife and I starting renting out an attached in-law suite on Airbnb last year. Do we convert our house to a rental property?

[Kurt-Nashville]

My wife and I starting renting out an attached in-law suite on Airbnb last year. According to my calculations based on square footage, the rental space is 30% of our house. We had it listed full time last year and rented it 130 something days last year. We lived full time in the rest of the house and it is our primary and only residence. My question and confusion is regarding converting our house to a rental property. Is that something that would be recommended? Or should we just declare the income and leave the house as personal property? Thanks!

[Coleen3 · Accepted solution]

You do not convert the entire house to rental, only the percentage of the space that you actually use. As you go through the rental screens, you will see areas for you to indicate the part personal, part rental use. You would divide your expenses 70% personal and 30% rental. While not every expense is personally deductible, such as mortgage interest and property taxes would be, any portion of these expenses allocated to rental will be. If you spend money on the rental section alone, such as painting or a repair, that is 100% deductible.

Please see the screenshot below. Note the:

 Rented

I rent out part of my home

[Kurt-Nashville]

Thank you for the clarification. My only other snag and question is regarding the section where it asked how many days the property was rented at fair rental price. I entered 131 for days rented. For the personal section, I would leave that blank because we never used the in-law suite for personal use. Is that correct? Thank you again!

[Coleen3]

Yes. There can be confusion between using a home for personal/business such as a vacation home vs separating a home into two distinct uses.

[Kurt-Nashville]

Thanks so much for your help!!

[Coleen3]

My pleasure.