Can I deduct any portion of my home Wi-Fi bill because I occasionally rent out a room on Airbnb?
It depends. If you rent a room in your home no more than 14 days per year, through Airbnb, VRBO, HomeAway, FlipKey, or the like, you get no tax deduction. But this isn’t so bad because you don’t have to pay any tax on the income you earn. You don’t even have to report it to the IRS.
If you rent out a room more than 14 days per year, you’ll have to report the income you earn to the IRS and pay tax on it. But you’ll also be entitled to deduct your rental-related expenses. However, there are very strict limits on such deductions to ensure that you don’t deduct personal expenses as rental expenses.
When you rent a room in your home, the IRS does permit you to deduct a portion of your expenses for your entire home such as electricity, gas, heating oil, water, and trash removal. However, the IRS does not allow deductions for your personal expenses. For this reason, you cannot deduct the cost of your phone line, even if your tenant has unlimited use of it. But, if you install a second phone line just for your tenant’s use, the full cost is deductible as a rental expense.
It’s possible that the IRS could view your Wi-Fi service as similar to your first phone line. It’s a personal expense you have to pay even if you don’t have a tenant, and the fact that a tenant has use of it does not increase your cost. In this event, the cost might not be deductible. Unfortunately, the IRS has yet to provide any guidance on this issue.
However, even if you are allowed to deduct your Wi-Fi service fees, you’d have to allocate your expenses by time and space. Only the proportion of the expense that can be allocated to the space used by your tenants and the time they use it, would be deductible.
First, you can only deduct an expense such as Wi-Fi in proportion to the amount of the home that is rented. You can use any reasonable method to do this allocation. The most common method is based on the number of rooms in your home, or the square footage of your home.
Example 1: Jane rents a room in her house to a college student. The room is 10