Need help with airbnb taxes!

[Sara Frank]

Hi all - I bought a primary residence in 2021 and I am renting the basement as a private guest suite on airbnb. I spent a couple grand furnishing it and getting it ready and the first booking was in late December of 2021. Am I able to deduct those set up expenses from my 2021 taxes? What is the best way to do that. Thanks so much in advance. 

[Mathias Simmons]

For disclaimer, I'm not a CPA, just have some experience and enough knowledge on the topic to be dangerous.

I'm assuming you lived there for more than 14 days or 10% of the rental days. How many days exactly did you have it rented out? Sounds like less than 15 if your first booking was in late December. If those assumptions are true, then there's bad and good news. The bad news is that the IRS treats this as a personal residence and your expenses are not deductible as rental expenses. The good news is the the IRS treats this as a personal residence and the income is tax free. Mortgage interest and property taxes are still deductible on your personal tax return. Talk to a CPA if you can carryover other expenses into a future tax year.

FYI, chapter 5 of the Advanced Tax Strategies book talks about short-term rentals and mixed-use property if you're interested in more info.