Depreciating home in 8829 business use vs SchC Line 13 for AirBnb

[parvitstax]

Hi,

I have a 2000 sq foot home. My home office is 100 sq ft. I AirBnB my 2 rooms in the home each 100 sq ft. 

Can you explain 8829 vs SchC Line 13 difference? 

8829 says business use of home so figured that's office + 2 rented rooms. 

It's obviously more beneficial to count on Lin 13 so wondering what factors to consider here to determine the appropriate placement. 

[Just-Lisa-Now-]

Dont enter it on Line 13.  

You add the asset near the bottom of the 8829 so the % of sq ft of your dedicated business space vs the sq ft of the entire house will apply to the expenses in the proper %..  

[parvitstax]

If I use my land as a campsite for AirBnb.. how would that space be deducted? Can it be depreciated?

[Just-Lisa-Now-]

Land doesn't get depreciated.

[TaxGuyBill]

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@parvitstax wrote:

SchC

It's obviously more beneficial to count on Lin 13

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Just double checking ... you are providing "services" to the tenants (such as maid service, meals, concierge services or transportation) that is putting it on Schedule C?

Why is it obviously better to have it on Line 13 of Schedule C?  If the activity is profitable, it should have the same result as 8829.

[parvitstax]

2nd year in business and 1st year earning income so business is not profitable yet. But I understand how in profitable years Line 13 and 8829 can have the same affect. 

1. The air bnb rooms are inside my home, why can't they be depreciated on line 13? Let's assume for a net negative year, would I be allowed to enter this on Line 13 if @TaxGuyBill says 8829 does the same thing as Line 13 but Line 13 is not limited to profits?

2. I am curious how running a campsite on my property could be depreciated, it at all? I have depreciated improvements to that area of my land already. 

[Just-Lisa-Now-]

Ohhh, I skipped the part about this being an AirBnB, I dont think 8829 gets used in this situation, does it?

I don't have any STR that use Sch C.

[TaxGuyBill]

So "services" ARE provided to the tenants, which puts it on Schedule C?

Because it is your residence, the §280A rules apply, including you can't deduct expense in excess of income.  It seems weird to put it on 8829, but the way 8829 treats it is correct (by not allowing the expenses in excess of income).

[parvitstax]

So under no circumstances should a home be depreciated as an asset for Line 13? Only depreciated as an asset for 8829?

I'm attempting to stretch this question to also address business use of my land... is it possible to deduct/depreciate that area at all? It is a campsite I had to put work into creating and exclusively used for that business. 

[qbteachmt]

"I have depreciated improvements to that area of my land already."

"business use of my land... is it possible to deduct/depreciate that area at all?"

Already answered.

The land itself is part of the planet. The land isn't getting used up by every camper.

As you fix up the camping area, make sure to separate maintenance and repairs expense from improvements.

[BobKamman]

"I had to put work into creating and exclusively used for that business."

Your labor is worthless, but did you put any money into it?  For what?  Land can require improvements which can be depreciated.  

[parvitstax]

@BobKamman Earlier I wrote:

2. I am curious how running a campsite on my property could be depreciated, it at all? I have depreciated improvements to that area of my land already.

So yes the improvements are depreciated and it seems that is the extent of what is allowed for business use of my land. 

[qbteachmt]

"and it seems that is the extent of what is allowed for business use of my land"

Let's describe depreciation: an allowance as an expense in consideration for the wear and tear which reduces the value over the useful life of the thing being used.

The campers are on the land, but that's not wearing out the land. The improvements you make in support of the business activity on the land, is what is wearing out over time and would eventually need to be repaired, serviced, replaced. Those are the assets which are in use for the business: Infrastructure to supply water, electric, sewer, fencing, parking or camping pads, these wear out.

[parvitstax]

If someone is willing to summarize this for 8829 v SchC line 13 I can accept an answer 🙂

[Just-Lisa-Now-]

8829 is for computing the business percentage of Office in Home

Line 13 is for depreciating business assets.

If youre selling your services as a tax professional, you should know how each of these work or at the very least be able to do the research to find out.  Posting in a public message board asking other tax professionals to do your job for you, isnt doing research.

[BobKamman · Accepted solution]

Depreciation for office in home is on Line 42 of Form 8829, which then gets entered on Line 30 of Schedule C.

Depreciation for two rooms rented in home might go on Line 13 of a separate Schedule C, if you are reporting this as a business, or on Line 18 of Schedule E, if it is just another rental. 

The amount of depreciation for each 100sf room should be the same, unless one or more rooms were added at a later date.  You might not be able to claim all the 8829 depreciation, if the business shows a loss.  You might not be able to claim the Schedule E loss, if your income is too high.  In both cases the depreciation gets carried over to a year when you might be able to claim it.  

I have no idea why you would say "It's obviously more beneficial to count on Lin 13," so you must be smarter than I am.  It's obvious to me that it's the same amount regardless of where entered.  

[parvitstax]

@BobKamman The "obvious" comment I explained earlier where the business was at a loss. Line 13 is not limited to profits only like 8829. 

[BobKamman]

So you are losing money in the tax preparation business? I wonder why.

My answer needs to be amended.  If you put the rented bedrooms on Schedule E, you get more depreciation because it's 27.5 years, not 39.0.  

[parvitstax]

Lol thanks for your unnecessary comment but it's for an Air BnB business. My tax business is doing just fine.