Posted by Karen Munoz, EA

Airbnb Taxes: Important Things You Should Know

Airbnb Taxes: Important Things You Should Know

Airbnb and a series of other home-sharing firms are fantastic ways to bring in extra income. You might have a spare room to let, lease out your house when on vacation, or even have another property to let on Airbnb.

If you are considering AirBnB, make sure to treat it as a business venture. This places some tax burden on you as well. If you know this on time, you can avoid any issue with Uncle Sam regarding tax time. 


Basics of AirBnB Taxes

There are some differences between Airbnb taxes and those paid in other self-employed businesses like Uber and Lyft driving. 

For people that rent their AirBnB on a very short time basis, an idea of the 14-day rule matters. 

  • For short-term rentals of 14 days or less, there is no need to pay Airbnb taxes. As a result, you will have no AirBnB tax debt for that year. 

  • This applies provided you use the property for nothing less than 14 days every year.

  • The same treatment applies to renting rooms in your house. You neither need to pay taxes or even include it in your return if you rent a room for less than 14 days a year. 

However, there is a catch in the sense that not reporting AirBnB income for less than 14 weeks also disqualifies you from deducting business expenses related to Airbnb operation. On the other hand, itemizing your deductions qualifies you for the typical property tax deduction.


Adequate Record are Essential 

The importance of record-keeping for all businesses cannot be overemphasized, and Airbnb is not an exception. There will be a series of business expenses with your income, which can significantly bring down your tax liability if you record them. 

Ensure you have good records so that you can present what you spent and your exact income when you rent the property. Your invoices for expenses and receipts are all essential. 

Every ordinary and necessary business expense can be deducted from whatever tax you pay on Airbnb. Things like:

  • Refreshment for your renters

  • Cleaning services

  • Expenses associated with repair and refurbishment of the rental room

  • Price of items you got for the room

With adequate and solid records, you have something to fall back to as proof rather than scrambling to figure out your taxes when it's time for taxes. 


Business Expenses and AirBnB Service Fees 

Airbnb and other platforms you use to rent your property might send you a 1099 form. With the data on the form, you can estimate your income and self-employment tax. 

It is essential to fill out Form W-9 when you start your Airbnb rental business. Failure to do so will make the company withhold part of your earnings as tax (28%). You would not have to pay up to 28% if you handled the tax yourself on your tax return in many cases. 

In examining your documents online with AirBnB, the amounts present will typically reflect the income before the deduction of service fees and expenses from another platform. 

This means that the income will be higher than what will reflect in your bank account since the provider removed the fees directly. One can deduct the entire cost as business expenses since the expenses are essential to operate the rental business. 


Airbnb Reports to Uncle Sam

Your getting a 1099 form from Airbnb is a factor of what you made in the year. 

For people with more than 200 reservations that amounted to an income above $20,000 in a year, you will get Form 1099-K from AirBnB. Operating a series of Airbnb accounts will also qualify you for more than a single tax form.

You and Uncle Sam get a copy of this form which means the IRS will cross check your tax return with its record. Mind you; you need not meet this threshold to report AirBnB income on your return.


FOR MORE INFORMATION OR TO SEE HOW KAREN MUNOZ, EA. CAN HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


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Karen Munoz, EA
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