Airbnb - residential depreciation or commercial

[ptax255]

Hi, client has part of the home (dettached) that airbnbs. Does not provide substantial services nor qualifies as RE professional so I think sch E is appropriate. However, is the property depreciated over 39 years or 27.5 years? Is any short term rental over 39 years or are there are other things to consider? Thank you.

[Strongsilence-CPA]

Are you self-employed?  Do you have staff?

[Terry53029]

In general, class life for Airbnb's is 27 1/2 years. If rented under 7 days OR substantial services use schedule C. Schedule E for no substantial services OR longer than 7 days. 

[TaxGuyBill]

Short term rentals that are 30 days or less (or is it "less than 30 days"?) are depreciated over 39 years because it is "transient" housing.

You are correct, no services means Schedule E.

[Terry53029]

@TaxGuyBill that's why I said "in general" as we usually don't have all the info.

[ptax255]

Since I'm getting slightly different answers - what is the IRS definition of transient? Is it strictly # of days rented? Less than 30 days or less than 7?

This is what I could find dated 2007. But what does "generally" mean? What's an example rented less than 30 days but depreciated over 27.5 years?

“Lodging facility” is defined in section 856(d)(9)(D)(ii) as a (l) hotel, (ll) motel, or
(lll) other establishment more than one-half of the dwelling units in which are used on a
transient basis. The term “transient” is not defined in section 856 or the regulations
thereunder. However, for other purposes of the Code, a renter has generally been
treated as “transient” if the rental period is less than 30 days.

https://www.irs.gov/pub/irs-wd/0840028.pdf

Also, this from EY and Airbnb says generally 27.5 years. 

https://assets.airbnb.com/eyguidance/us.pdf

Thank you!

[BobKamman]

That's an interesting question.  I think most Airbnb rentals are less than 7 days, so I think it's obviously "transient."  However, there seems to be an 80% rule, and the question is whether you count the entire property, including the part where the taxpayer has residential personal use.  There is an example in some IRS publication that says for office  in home, it's 39 years, unless your home is in an apartment building that you own and rent out other units for residential use, and then you get to use 27.5 years.  This seems to derive from the last part of Section 168(e):

(2) Residential rental or nonresidential real property.

(A) Residential rental property.

(i) Residential rental property. The term "residential rental property" means any building or structure if 80 percent or more of the gross rental income from such building or structure for the taxable year is rental income from dwelling units.

(ii) Definitions. For purposes of clause (i) --

(I) the term "dwelling unit" means a house or apartment used to provide living accommodations in a building or structure, but does not include a unit in a hotel, motel, or other establishment more than one-half of the units in which are used on a transient basis, and

(II) if any portion of the building or structure is occupied by the taxpayer, the gross rental income from such building or structure shall include the rental value of the portion so occupied.