Airbnb taxes, one of hosting's toughest challenges. This brief guide (15 minute read) will provide you with the essentials of understanding Airbnb tax for a total beginner. Please note, this brief guide is designed to apply to most Airbnb host situations, but is not a comprehensive guide. Additional guidance may be needed for hosts, please comment below if you have a question. In addition, please seek the advice of a qualified professional before filing your Airbnb taxes. Please subscribe for more Airbnb and vacation rental tips, hacks, and advice.
Will I receive a tax form from AirBnB?
Yes, Airbnb may issue you a Form 1099-K (Payment Card and Third Party Network Transactions), or make available an Earnings Summary, reporting gross income earned during calendar year. Regardless or not if you received this form, you must report income you earned on Form 1040, unelss the non-taxable rental exemption applies. Importantly, the gross amount reported to you will exceed actual amount of your Airbnb payout. Refunds ,service fees, and adjustments not included in gross. You can deduct commissions paid to Airbnb on your tax return, reducing the amount you owe the IRS.
Where do I report my Airbnb rental activity on taxes
First step to preparing your Airbnb tax return is to determind where you should actually report the rental activity. Short-term rentals can either be reported on Schedule E, Schedule C, or non-taxable.
Next, we define Schedule E, C, and non-taxable:
Schedule E Rentals- Most common. When a host does not provide "substantial services" to guests. You are not subject to self-employment tax.
"Substantial services" for Airbnb hosts commonly include:
- Cleaning of occupied rental
- Guest tours and outings
- Providing meals and entertainment
- Transporting your guests
"Insubstantial services" are what is normally provided to guests, absent substantial services you cannot claim any expenses on a Schedule C Rental.
- Water and Gas
- Repairs & Maintenance
- Trash collection
- Heating / AC
Schedule C Rentals- If providinging substantial services listed above to your guests, income is subject to the self-employment tax.
Non-Taxable Rentals - Your Airbnb may not be taxable (no matter the amount) if the property was used by a host personally as a residence during the year and not rented at a fair rental price for more than 14 combined days during same year. Only deductions allowed will be property taxes and mortgage interest on Schedule A.
Is renting your Airbnb considered a passive activity?
You may be thinking, rental activity is passive activity. Not so fast. Think of what hosting is, if you "actively participate" in the rental activity by managing or "working it" you may be subject to self employment taxes and required to file a Schedule C vs Schedule E.
You may be actively participating in rental activity if you:
- Make important management decisions
- Approve new guests & decide rental terms
- Approve capital expenditures, budgets, purchases
- Arranging others to provide services (think managing your own property)
Does Airbnb collect taxes in my city?
I am based in Orlando and Airbnb has an agreement to collect taxes with Polk, but not with Osceola county. In your city, this will depend. Please comment below if you have a question about this. For reference, please visit Airbnb directly to find out how occupancy tax collection and remittance works.
Is my Airbnb subject to self-employment tax?
You may be subject to self-employment tax if you are materially participating. This means regular and consistent activity running your Airbnb. To illustrate, money from stocks and bonds are passive and would be on a Schedule E, but if you are actively running your Airbn you would file a Schedule C and be responsible for self-employment taxes.
Do not forget to save your receipts and invoices. Business expenses signficantly reduce the taxes you have to pay. Go through your expenses weekly to understand if you are actually making money or losing money.
Airbnb Tax Deductions
Tax deductions saves money for hosts. Reduce your total tax liability and pay less tax, a win in my book. Common tax deductions include, but are not limited to:
- Mortgage & lease payments
- Sheets, linens, towels, consumables
- Cleaning fees
- Gas, oil, and maintenance to travel to and from your rental unit for business
- Cable, Netflix, Hulu
- Supplies for guests
- Home: Rent, Electric, Utiliies, etc.
- Cell phone useage, laptop used for Airbnb
- Commission fee taken by Airbnb (the payout number vs. the 1099 from airbnb)
Please be sure to keep all receipts and invoices for your Airbnb rental. Money you spend to operate your business or earn more income can be used as a whole or partial deduction on your taxes.
Large purchases and your Airbnb
If you are buying bigger ticket items, please check with your local CPA, these rules vary wildly by the type of asset you are purchasing.