Hi! We are in the middle of a remodel that will create a studio apartment we will Airbnb.
Are there construction costs we can claim as business expenses? Or do we have to wait to rent out before that’s allowed? What about purchasing appliances for the sole use of the rental?
Are you in the U.S.? If so, I would assume that you can depreciate the cost of construction. However, you would have to recapture the depreciation upon sale of the property. You should ask your CPA who will know the particulars of your situation.
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Thanks, yes, in San Francisco, but out near SF State University. Curious about when to get business license too.
The rules for business licenses are specific to each city. If I were you; I’d call whichever branch of the city government is in charge of business licenses and ask. In Los Angeles it’s the City of Los Angeles Office of Finance. I’ve heard that in San Francisco it can take months.
You should be able to offset any expenses against your taxes. But this depends on your local laws. Be sure to calculate everything extremely well when deciding on your nightly rate for your rental. I’ve found that most hosts underestimate the costs of doing business.
Construction costs are capital costs, not expenses. Capital costs are depreciated, not written off.
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Took two months here in Boulder to get a license and I couldn’t rent or even take future reservations until I got the license.
Some CPAs won’t let you write anything from your Air rental off as a business deduction. I had a rude awakening when mine says my place is a standard rental Because like yours, it is a studio apartment that is part of my house and I can only take the depreciation of that plus a few expenses. Make SURE to consult your CPA before assuming Airbnb will be your new business windfall that comes with a slew of deductions you’ll be able to write off!
We’ve also had hosts here get in trouble with declaring these things on their taxes. Then if you want to refinance, Fannie or Freddie sees you are using your place as a business and will charge you a higher interest rate because of it, or worst case scenario cancel your mortgage altogether because they take a hard line on what is residential and what isn’t. So just be careful!