Learn Spanish (Latin America): Mi dormitorio está arriba.

Encima de specifically means 'on top of' something else, like a book resting on a table. Arriba is used for a general direction or location, meaning 'up' or 'upstairs'. Since we aren't saying the bedroom is physically resting on top of a specific object, arriba is the right word.

Do I need to add de after arriba in this sentence?

No, you do not need de here. You only use complex prepositions with de when you are saying something is above or on top of something specific (like arriba de la mesa). When you are just saying 'upstairs' or 'up' in general, arriba stands completely on its own.

Isn't a bedroom permanently upstairs? Why use está instead of es?

In Spanish, the rule for location is absolute: always use the verb estar (like está here) for the physical location of people, places, and things. It does not matter if the location is permanent like a room in a house or temporary like a person in a store.

Could I use cuarto instead of dormitorio?