From shared use property to Schedule E tax forms, there are many factors to consider regarding Airbnb taxes. But don’t let that scare you.
With the correct information and planning, you can stay on top of your tax obligations and keep more of your hard-earned money in your pocket.
In this blog, we’ll dive into the different types of taxes you may encounter as an Airbnb host, provide practical tips, and help you confidently navigate the complex world of Airbnb taxes.
Whether you’re a seasoned host or just starting out, this blog is your go-to resource for all things Airbnb taxes.
Primary vs. Secondary Residences
When it comes to taxes, the first distinction is to determine if you’re renting a primary residence that you live in or a second property.
If you’re renting a second property, the IRS has fewer limitations on the income and expenses you can claim.
If you have no personal use of the second property, you can typically claim all its expenses on your tax return.
However, if you use the second property for part of the year, the IRS may limit your expenses based on the amount used.
The limit is calculated by dividing the days you used the property by the days it was rented.
Shared Use Properties
For properties where you have shared use, you’ll take the total number of days you used it and divide it by the total number of days it was rented.
The resulting percentage is the limit of the expenses you can claim.
Minimum Use Rule
The IRS minimum use rule states that if you rent out your property for less than 15 days in a year, there’s no need to report the income.
Unfortunately, you won’t be able to report any expenses either.
What Airbnb Tax Forms Can I Expect?
If you’ve set up your host account as an individual with a social security number, you’ll receive a 1099-K.
For non-US persons who filed a W-8 certifying that your country of residence is not the US, you’ll receive a 1042-S.
If you’re a business renting out a property, you’ll receive a 1099-MISC.
Rental income and losses are reported on Schedule E.
You’ll report the gross income received from a 1099K or 1099 miscellaneous issued by a booking company.
You’ll report expenses associated with the rental property and need to calculate limits for expenses.
Reporting on Schedule E is not subject to self-employment tax.
Individuals who provide substantial services or real estate agents may be required to report on Schedule C if they’re actively participating in the business.
If you’re in this category, it’s best to consult an experienced tax lawyer to help you file correctly.
Understanding the tax implications of renting your property is crucial to ensure you file correctly and avoid IRS tax penalties.
Limits on Losses
If the activity is considered passive, you may be subject to at-risk rules, which limit your losses to the amount invested.
Additionally, you may be subject to passive activity limits, meaning you’ll only be able to claim losses against other passive gains.
You won’t be able to use the losses if you don’t have any other passive gains.
State and local taxes may also apply based on the rental property’s location.
Maximize Your Earnings with Reliable Tax Advice
Airbnb taxes are an essential aspect of hosting on the platform and should not be overlooked.
With so many tax laws and regulations to consider, it can be challenging to stay on top of your obligations as an Airbnb host.
We encourage you to take the time to understand your tax obligations and consider working with an experienced tax lawyer to stay on top of your Airbnb taxes.
Allowing you to focus on what you do best–providing amazing experiences for your guests.