With the end of the year fast approaching, now is the best time to consider your tax strategy for the new year. By planning ahead, 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 101 For Your Airbnb, HomeAway, VRBO Business
- 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. Identify whether your short-term rental income is considered to be business or rental income. If you are a Schedule C filer, your short-term rental income will be considered as business income and you will be subject to self-employment taxes.
- Keep track of your earnings by reconciling your bank account against the amount that is reported in the short-term rental platform dashboard, as well as, on the Form 1099-K that you receive from the platform.
- 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 burden.
What Are The Best Resources For Tax Planning?
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.
Here are some recommendations for tax planning sites:
- The IRS’s e-News Subscriptions web page, located at https://www.irs.gov/newsroom/e-news-subscriptions, can allow you to receive tax updates as they become available via email.
- Professional accounting organizations, such as the AICPA (http://www.aicpa.org) and the NYSSCPA (http://www.nysscpa.org/home), and the National Association of Tax Professionals (http://www.natptax.com), have sections on their websites devoted to tax planning.
- Intuit, the maker of the Quickbooks accounting software, maintains a discussion board at https://quickbooks.intuit.com/community/US-QuickBooks-Community/ct-p/community-us where you can obtain answers to specific tax planning questions from community members.
While these resources can provide you with a place to start in researching the answers to your questions, you should always obtain advice from a qualified CPA or accountant to ensure that the advice applies to your unique tax situation.
Why Hire A Tax Planning CPA Or Accountant?
For most short-term rental hosts, business taxes are simply too complicated for hosts to handle themselves. While commercial tax preparers are okay for simple returns, they are not prepared to deal with the changing tax regulations that come along with operating a short-term rental business.
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.
Not only do you need help at tax time, but you can also benefit from year-round tax help to ensure that you’re on track to meeting your financial goals. Tax planning CPAs and accountants will provide your business with a range of other services, from bookkeeping to estate planning, to ensure that all of your tax planning needs are met.