There are a number of deductions available to you if you are engaged in rental activities, regardless of your ownership status. We refer to this group of deductions as "Operating Expenses", which are comprised of costs associated with day-to-day management and maintenance of your rental.
Tasha rented the guest bedroom in her personal residence for 22 nights last year. Tasha estimates that the guest bedroom / portion of her house related to rental activities makes up 20% of her residence. Last year she spent $20,000 on rent, utilities and other minor operating expenses. Tasha's Schedule E operating expenses would be equal to approximately $241 ($20,000 x 20% x (22/365)).
Lisa owns a second home which she rented through Airbnb for 300 days last year. Lisa and her family did not use the home for any personal purposes all year. Since her personal use was not more that the greater of 15 days or 10% of the total days rented to others, her second home would be considered a rental property and she can deduct all operating expenses related to this property (to the extent allowed based on passive activity rules).
Homer Sampson subleases a room in his apartment to a tenant on a long term basis. Last year, he paid a lawyer $900 to draft a rental agreement. Unfortunately, there were major renovations going on in his building and Homer's roommate moved out after 7 days. Homer was unable to rent the room in his apartment to anyone for the rest of the year. Since Homer did not rent the property for 15 days or more last year, he would not be able to deduct the $900 he paid his lawyer, or any other operating costs he incurred throughout the year. However, he also would not have to report the seven days of rental revenue he collected.
Last year Jesse rented out his guest house on a short-term basis for almost the entire year and he did not use his guest house for any personal purposes / days. Jesse can deduct the full cost of linens, basic toiletries, cable TV, small snacks, etc. furnished to his guests as operating expenses to the extent allowed on his Schedule E.
Anu owns a second home which he rented on VRBO for 250 days last year. Anu used the home for 20 days last year and let family friends use the property at a discounted rate for 7 days. Unfortunately for Anu, the below-market days he let his family friends stay at the property would be considered personal use, and any personal use over 25 days (10% of total days rented to others at a fair market rate) means his property would be considered a personal residence. Accordingly, his operating expense deductions will be limited to the portion of expenses attributable to rental use.
