Convert AirBnB to Vacation Property

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I had an airBNB that only got limited use in 2023. However the property was renovated in 2020 and I take depreciation on the renovated property. How does this deduction change (or what are the tax implications) if I change this from a rental property via AirBnb to a non-rental/vacation property that I use for more than 14 days in the year?

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  • PhillipB
    PhillipB FreeTaxUSA Team
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    Hello, and thanks for joining our community.

    You will not see a big effect immediately.

    If the property is not rented at all, there will be no additional depreciation in future years and you will not have to report any income or expenses on the property.

    If the property is rented, you will still report income and expenses and you will need to track days used for personal use, days rented, and days vacant to report on your return. Your expenses will first be limited to the fraction of days used for rental / total days used, and then the total expenses will be limited to gross rental income.

    You will need to continue to maintain records of the properties depreciation. When, and if, you sale the property, you will need to include the depreciation recapture.

    Let me know if there is anything else we can help you with.

Answers

  • CoryF
    CoryF FreeTaxUSA Agent
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    Thank you for this question, Pierre.

    Changing use of property is done within your business records and your use intentions (non-recorded). Any repairs and/or depreciation will be claimed on the property when it was available to rent. You will want to keep a record of the depreciation claimed and the time frame that it was available to rent, for when or if you sell the property at a future date. The depreciation taken or allowed to be taken (IRS language and requirement) will need to be reported and recaptured as normal income if you sell the property at a realized gain. When the property is a vacation use only, no income or expenses will be claimable on it on your tax return. You can deduct the property taxes as an itemized deduction on your personal tax return moving forward.