With the end of the year fast approaching, now is the best time to consider your tax strategy for the new year. With proper tax planning, you can maximize your deductions before tax season begins. Use this short-term rental business tax planning checklist and guide to help you start the conversation with your accountant or CPA.
Tax Planning Checklist For Airbnb, HomeAway, VRBO Businesses
Estimate your future income
The first thing you need to do when it comes to tax planning for your Airbnb, VRBO, and Homeaway business is to determine whether you expect to earn more or less in taxable income next year so that you can decide whether or not its best to accelerate or delay your income and tax deductions.
Business vs rental income
Determine if your rental income qualifies as business income. If the IRS considers your rental earnings as business income, you must pay self-employment taxes.
Keep track of your earnings
Make sure your bank transactions match the total reported on your user dashboard. Also, ensure the totals reported on your homeshare 1099-K form are accurate.
Claim all of your deductions
The most important aspect of tax planning for your short-term rental business is making sure that you claim all of the business deductions that you are eligible for. It is easy to forget about business expenses that you’ve incurred over the course of the year unless you’ve carefully maintained your receipts and invoices. Consider upgrading to receipt management software or expense tracking apps to help relieve some of the burdens.
Tax Planning Checklist: Must-Have Resources for Homeshare Hosts
Finding the answers to your specific tax questions can be a daunting tax. In general, subscription-based websites, professional discussion groups, and specialty taxation websites will provide the most reliable sources of information.
The resources could be useful for tax planning projects:
IRS e-News
Get the latest IRS tax updates in your inbox.
Professional Accounting Organizations
These professional organizations have extensive resources on their websites for small businesses and other taxpayers.
These resources should answer some of your basic questions. However, you should consult with a tax professional to ensure the advice applies to your unique tax situation.
Hiring a Tax Planning Professional
For most short-term rental hosts, business taxes are simply too complicated for hosts to handle themselves. Retail tax prep is okay for simple returns, but they usually don’t have the expertise homeshare hosts need.
Even a single rental property requires extensive recordkeeping in order to ensure that income and expenses are being properly reported. You also need to be aware of depreciation, repairs and maintenance, and rental income loss rules. Having a qualified tax planning CPA will allow you to obtain professional advice on how to manage your deductions.
Year-round tax planning can ensure that you’re on track to meet your financial goals. Tax planning professionals provide businesses with a wide range of services that can address all of their needs. The experts at Shared Economy Tax have decades of combined experience serving shared economy entrepreneurs like you. They understand all the ins and outs, so they can offer you the most relevant advice for your business. Talk to a Shared Economy Tax pro today to see how we can help your business better manage their taxes. Get started now with a one-on-one strategy session with a certified tax pro, or sign up for our newsletter with the form below for even more tax tips.