Attempt AirBNB, Losses from Start

[MAKER-51269]

We bought an old cabin to start an AirBNB business.

We took out money from our primary to pay cash for the property. There is a very small window in which contractors and architects will come to look at or work on the property due to the snow. We missed that window last year. Things are slowly moving along this year. Additionally, compound on the fact that there is a shortage of contractors and architects. Because of all this, we have not been able to get the cabin to a habitable state. So, since 1/11/21, it has been seating there. 

We are taking a loss of roughly, 1500/month. That's the difference in old and new mortgages for our primary after taking money out to purchase the cabin.

There are costs like structural architect drafting, dumpsters, miscellaneous tools, snow plowing service, etc. The list goes on and on.

How do we claim the losses? Can we?

We bought the Turbo Tax Home and Business and are now at the "Business" section:

We are lost and don't know if this is the section to enter it.

Any advise is appreciated!

[Mike9241]

seek professional help. some of what you mentioned would be capital assets adding to the cost of the cabin which means they wouldn't be currently deductible.  In addition, if it was ready for rental in 2021, none of the 2021 expenses would be deductible on your 2021 return. you need a pro to sort through things.

[MAKER-51269]

I do understand that it is hard. I had every intention of buying TurboTax Live this year to get help with this. I didn't know what we had to buy the online version.

I might have to eat the cost of the desktop version within the next couple days if no one else has advice.

But I would like to keep our taxes in TurboTax, if possible.

Thank you for the reply.

[GeorgeM777]

To follow-up on the comments from @Mike9241, your particular situation is complex.  However, perhaps a good part of it will not apply to tax year 2021, because your property is not ready for rental use.  As @Mike9241 explained, some of your costs will indeed need to be added to the cost basis of the cabin, and thus, will be part of your depreciation when the property is "placed in service."  Here is an example from IRS Publication 527, Residential Rental Properties, which in part, relates to your situation.

• Example 2. On April 6, you purchased a house to use as residential rental property.  You made extensive repairs to the house and had it ready for rent on July 5.  You began to advertise the house for rent in July and actually rented it beginning September 1. The house is considered placed in service in July when it was ready and available for rent. You can begin to depreciate the house in July.  Page 6 of IRS Pub. 527

Here is a link to IRS Publication 527 which you might find helpful.  There are some other examples beginning at page 6 that you also might find helpful. 

Residential Rental Property

You are correct in that the option to speak with a Live Agent is only available in the TurboTax online products.  Here is a link to a TurboTax article which will explain the process of obtaining a refund for the product you purchased.

How do I request a refund for my TurboTax product?

@MAKER-51269

[Carl]

Weather your endeavor qualifies as a SCH C business (could, but not common) or a SCH E business, you have absolutely nothing what-so-ever to report about this on your 2021 tax return.

With SCH C, nothing is reported until the tax year you are actually "open for business". 

With SCH E, nothing is reported until the tax year the property is "available for rent".

So you have absolutely nothing to report on your 2021 tax return concerning this endeavor.

I do agree that you should seek professional help. Especially if your state taxes personal income. When it comes to rental property, absolute perfection in that first year is not an option..... its a must. Even the tiniest of mistakes can (and will) grow exponentially over time. When you catch the mistake years down the road (usually in the year you sell it) the cost of fixing it *will* be expensive.

You should seek professional help for at least the first year. Then after that if you want you continue reporting it yourself and are confident in doing so, you most certainly can.

[MAKER-51269]

Thank you all for the advice. I'll not try to claim the losses this year. I will probably start using professional tax services from here on.

I really wanted to stick with Turbotax but as our taxes are getting more complicated, I guess this isn't going to be possible.

[Carl]

Professional help for the first year is usually best. Just make sure you get a complete printout that includes all calculation forms and worksheets. Then if you want, you'll have all you need to continue on your own if you so desire, next year.