I've got a second home that I am considering using for short term rentals thru VRBO/Airbnb. I have been looking at the tax implications and filings that this would require, and there seems to be conflicting information as to which form would be used to report this activity. I have read Airbnb's publication by Ernst & Young, who say to use Schedule E, since you are receiving rental income, while another article on Airbnb says, watch out, many tax preparers will tell you to use Schedule E, but you should use Schedule C because you are a business.
Here are some of the conditions I've found relevant to determing which Schedule to use:
I visit the home about two times a month, and stay for three to five days at a time, relaxing and doing repairs. I would continue to do this.
I anticipate the average short term rental would be less than seven days. This is what seems to determine that I would need to use Schedule C, per IRS Pub. 925, page 3, "Rental Activities - Exception 1"
I file a Schedule E, Part IV, non-passive activity from a K-1, Estate/Trust
I also file Schedule A, B, D, and Form 8949.
No services would be offered to renters, other than a place to stay. They would do their own cooking, laundry, etc.
I would hire a houskeeper to clean between renters.
I currently do repairs such as plumbing, electrical, mechanical, gardening, etc., and would continue to do so.
Once the home is put on the short term rental market, are major replacements such as water heater/ac/furnace/ an expense or must they be amortized?
If I suffer losses, is it diffult to 'unwind', tax wise, and get out of the short term rental activity? I don't want to get into something I eventually wish I hadn't. Even when vacant, which it is most of the time, there are still expenses such as property taxes, gas/water/electric/sewer, pool guy, gardner...I would like to offset these costs in orer to keep the home. I may move there someday.
Thanks.