Hi guys, SOP here again.
My wife and I dream of retiring in about 13 years, and we envision that well scale down from our 2700 sq. ft home in CA to a 2-bedroom luxury apartment, somewhere in a metro areac that is popular with tourists.
We should be able to retire comfortably on combined retirement savings, and we plan to be traveling outside of the U.S. for likely most of the year: we would come back to the U.S. to our “hub” just so we can rest for a few days and then head out to see our kids (who will be a flight away or a drive away) from the apartment.
If we plan to live in that apartment for a minor part of the year – say, 50 days, maybe less during a year – but it is our only / primary residence, could we AirBnB that place for the rest of the year, while we’re traveling? I understand the strategy with short-term rentals of investment property, but what about short-terming a primary residence?
I understand that we would be giving up the expense write-off, and simply claim the short-term rental as extra income. Can you talk a little bit about the main things to watch out for in short-term renting a primary residence vs. an investment property, other than giving up this tax write-off, if we do this strategy? Would it be too much to allocate the portion to the business vs. primary use – and what if we rent the whole apartment, vs. keeping the main bedroom not for rent?
I’m looking at Mark’s matrix on “How Short-Term Rentals are Taxed” and I’m a little bit confused.
Our scenario is: average stay < 7 days, No substantial services, but also No material participation (I frankly don’t want to deal with it, traveling over the world).
Would the short-term rental income not land on Schedule E? — the matrix appears to say this income would be Schedule C for this combination of factors. Can you please explain?
Thank you so much!
Answered your question in today’s recording…9/17. Please look for it in the next few days. Thank you!! Mark