How to allocate home expenses in airbnb of primary home when rent whole house sometimes and sometimes just a room

[mrfkl]

I have 3 Airbnb listings, all using my primary home.  I have a listing for each of two spare bedrooms and a listing for the entire home, which I rent when I'm traveling.  When I rent the spare rooms, the guests have access to all the common areas of the house, including the backyard.

I intend to combine all three listings into a single schedule.

How do I allocate home expenses, property taxes, mortgage interest between, and home depreciation between the Airbnb rental and my personal use?  Because I rent the whole house and also individual rooms with access to the common areas, can I allocate 100% of the expenses to the rental? If not, how would I properly allocate the expenses?

[AnnetteB6 · Accepted solution]

For the days that the whole house is rented, you would allocate 100% of the expenses.  

For the days that only a bedroom is rented, the most accurate thing to do would be to allocate expenses based only on the square feet of the bedroom divided by the square feet of the whole house.  Even though the guest has access to common areas as well, you are also there using the common area for personal purposes.  Therefore, you could not include all of the common area as part of the rental space.  For example, if the bedroom is 100 square feet out of a 1000 square feet whole house, the bedroom is 10% of the space.  Therefore, for days that bedroom is rented, you can allocate 10% of the expenses to that rental.  If the second bedroom is also rented, then you can add the percentage of expenses for that room on that day as well.

Since you are combining all of this as a single rental property, you will need some detailed records to back up your calculations.  You will need to show what part of the house was rented at any given time so that all the prorated amounts can be calculated and entered into your return.

You will need to count the total number of days rented for each of the three possibilities -- total house, bedroom 1 and bedroom 2.  Then allocate the total expenses to each one based on the number of days each was rented during the year.  Then add the three totals together to account for the whole year with regard to each expense category.

As you enter your information, do not rely on TurboTax to do any of the math for you.  You will need to enter your own information based on your own records.

[mrfkl]

@AnnetteB6 Thank you for the detailed response. Very helpful. I have a couple follow up questions:

For the times when 1 bedroom is rented, I am sharing the common areas with the guest. Wouldn't it be fair to allocate 50% of the common area (by square footage) expenses to the bedroom rental? (in addition to 100% of the allocation to the bedroom square footage itself).

For allocating expenses for the whole house listing: Can I allocate expenses based on the number of days that my house was "available for rent" - not just the days that the house was actually rented? For example, the whole house was available for rent for 100 days during the year (while I was traveling), but it was actually rented for only 60 days. Therefore I had a 60% occupancy and 40% vacancy.  Can I allocate 100 days worth of expenses to the whole house rental rather than just 60 days? This is how I would normally treat a rental property. The expenses during a vacancy are normally still deductible.

[AnnetteB6 · Accepted solution]

Yes, on both questions.  

It is reasonable to allocate part of the common area with the rental as long as you 'keep' some of the space allocated to your own personal use.  

Similarly, if your whole house was available to be rented but it was actually vacant, it was considered to be a rental property during that time when you were not living there.

@mrfkl 

[mrfkl]

Thank you @AnnetteB6 . One more follow up:

Similarly, my two individual bedroom listings are available for rent the entire year except for the days that my whole house is available for rent or rented.  So, likewise, I should be able to allocate expenses to the bedroom listings (based on square footage, including their share of the common areas), even for the time that my individual bedrooms are vacant, correct?

I would just exclude from the expenses for the individual bedrooms the days of the year when my whole house is rented or available for rent, correct? (to avoid double counting expenses)

In that case, can I allocate home expenses to each bedroom listing for the entire year (minus the days that my whole house is available or actually rented)?

[RobertB4444]

Yes.  It sounds like at least a part of your home was available for rent every day during the year.  The math looks like this-

100 days whole house available for rent - 100% of expenses for 27.4% of the year.

265 days partly available for rent - the two bedrooms and half the common area (whatever percent that is) for 72.6% of the year.

Work all that out and you'll get the percentage rented.  Then save the records in case anyone ever asks you to prove the number.

@mrfkl 

[mrfkl]

Thank you @RobertB4444 and @AnnetteB6 

Given your responses, the overall "percentage rented" (including days rented or available for rent) could vary from year to year, depending on how many days my whole house is available for rent that particular year. How would I handle the depreciation expense each year?

With my other rentals I'm used to turbotax computing a straight line depreciation for 27 years and automatically computing the depreciation of the same asset each year, which is very convenient.

Say the "percentage rented" is 70% in year 1 and 80% in year 2.. and the value of the home (minus the value of the land) is $100K. What value should I plug in to Turbotax for year 1 (2022) for the value of the home? And what changes do I need to make in Turbotax in year 2 (2023) to make sure the depreciation expense is correct? I'm hoping that I can just make a change in Turbotax each year rather than have to compute this manually each year.

[RobertB4444]

The system will adjust based on your business use percentage each year.  It's automatic.  You're good.

@mrfkl 

[mrfkl]

Thanks @RobertB4444 - that's great to hear. Finally, for my situation would you suggest I use Schedule C or E for my Airbnb income? If either, which one would be more beneficial assuming I'm going to have a mostly losses after I figure the depreciation and other expenses.

[AnnetteB6]

You would use Schedule E Rental Income and Expenses.  

The only time Schedule C would be used is in the situation when significant personal services are provided by you to your tenants.  For example, think of the case of a bed and breakfast.  The host provides daily services (hotel-like services such as daily cleaning, meal service, etc.) to the tenants and is therefore operating as a business, not just a rental.

@mrfkl