If you as a US taxpayer earned over $20,000 and had over 200 reservations you will receive a 1099-K. Even if you do not receive a form from AirBnb (i.e. you earned less than $20k) you still have to report income (with an exception noted below). Reporting income is not the same as paying taxes – the taxes you owe on April 18, 2018 depend on how many deductions you had and various other factors, like your other sources of income. If you’re not a US person you are required to report your US source income to the US and pay taxes on it. It does not matter how many properties you rented out or what taxpayer IDs the properties are under if all of the income is attributable to your activity. And if you’re a US person, it doesn’t matter where the properties are located – you have to report the income.
So what’s included in income?
You have to report anything you receive for the use of the property:
- cleaning fees
- rent paid in advance
- portion of security deposit used to cover losses
- any amounts paid for utilities by the tenant
- cancellation fee
Income Exception: If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental. You are not required to report the rental income and rental expenses from this activity on Schedule C or E (Form 1040).
If you have more than one AirBnb account, you might receive more than one form. If you changed taxpayers (i.e. the apartment was rented under your boyriend’s SSN), you report what income was booked under your taxpayer ID.
Ok – so how do I reduce my taxes? This is not everything but here are some common deductions for AirBnb hosts:
- Rent to the landlord
- Payments made as refunds to tenant
- Cleaning and laundry expenses
- Property insurance
- Private mortgage insurance
- Property taxes (deductible on Schedule A even if income exception applies)
- Service fees by AirBnb
- Interest used to acquire property (mortgage or otherwise – deductible on Schedule A even if income exception applies)
- Ordinary and necessary travel and transport (mileage)
- Repairs (not improvements)
- Depreciation (even if you don’t own the property – the furniture, window-treatments,etc…)
- HOA Fees
- Accounting, legal, property management fees
- Occupany and sales taxes
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You should verify what taxes AirBnb took out of your earnings – county, city, VAT, state, federal income, occupancy, etc…because you will want to collect and report these correctly to the IRS and various taxing authorities if AirBnb hasn’t already done so. Even though AirBnb collects and submits the taxes in San Francisco, Chicago and 34 states don’t assume AirBnb will correctly calculate and charge local taxes to your guests based on your property’s location. In some locations occupancy tax may be as high as 15% or may need to be filed monthly.The host is responsible for remitting the tax whether it is collected or not. A best practice is to show the occupancy tax as a line item on the bill to the guest.
In some areas, there is no occupancy tax on short term rentals. Short-term usually means less than 30 days, but Hawaii and Florida it’s up to six months. There are penalties for not paying occupancy tax from 10-25% of tax due, plus interest and late fees.
So do I get to claim 100 percent of these expenses?
Probably not. Did you have the property listed on AirBnb the whole year? You have to pro-rate the expenses based on how many days it was rented and how many days it was used by you. Did you list the entire property? If not, you’d have to further pro-rate the expense based on the number of rooms or square footage. Are you subject to vacation property rules? These rules further reduce your deductions. And if the property was your home and you rented it for less than 15 days you can’t claim any expenses.
Ok – so where do I report this stuff?
Schedule E or Schedule C depending on your level of participation in the rental activity. AirBnb does not report each host’s listings to local tax authorities. Keep in mind some states, like California, consider any rental activity to be passive income.
This is boring. I hate math. And I have someone checking in today to my listing. Can you do this?