One of the most lucrative ways to earn an income in the Sharing Economy is through home-sharing platforms like Airbnb. Airbnb allows homeowners to rent out their vacant properties and spare bedrooms. If you’re an Airbnb host, the IRS classifies you as self-employed and applies certain tax rules to your business. As a result, you could owe more taxes than you think. If you think you need Airbnb tax help, watch this video and read this blog to learn the basics.
Homeshare Tax Basics
Airbnb pays you directly and they don’t withhold taxes from your earnings like an employer would. Homeshare platforms are essentially third-party payment processors. They market your listing and facilitate payment, but it’s up to you to manage your taxes. You have to calculate and pay taxes on your own. You won’t be receiving a 1099 K unless you have more than 200 transactions and more than $20K in revenue.
If you earn a lot on Airbnb, you probably need to pay estimated taxes too. Estimated taxes are like down payments on your year-end tax bill. The IRS doesn’t want to wait until April 15th to collect, so they want payments every quarter. If you owe more than $1,000 in taxes, you probably need to pay estimated taxes. Self-employed taxes total about 15.3% of your take-home earnings, but you can deduct half on your tax return.
Airbnb Tax Planning
Airbnb tax planning strategies can help you save on taxes. Some examples include maximizing deductions, timing large purchases, utilizing tax-deductible retirement contributions, and more. Properly planning these types of financial maneuvers can reduce your tax bill and help you achieve your financial goals.
Local Taxes and Regulations
Taxes and regulations vary from city to city. Some towns have very strict rules for Airbnb hosts. For example, New York prohibits hosts from renting an entire apartment for less than a month. It’s your responsibility to research and follow local regulations before you set up shop.
State and local taxes can also impact your bottom line. If you operate multiple locations in the same tax district, you should consult with a tax professional that specializes in the area. These tax specialists are commonly called SALT accountants. They can help you minimize your local tax bill.
Deductions and Write-Offs
Airbnb hosts have to spend money to support their businesses. These expenses often qualify as deductions or tax write-offs. A few common tax deductions for Airbnb hosts include:
- Rent or mortgage payments
- Insurance
- Maintenance and repairs
- New furniture purchases
- Improvements to the property
- Subscriptions
- Marketing
- Traveling to and from properties
- Professional fees
Keep detailed records of all your expenses so you don’t miss any deductions. These records can also support your case if the IRS questions your tax return.
Other Homeshare Apps
Airbnb isn’t the only name in the homeshare game. VBRO is another big contender, but it varies slightly. VBRO only offers whole-house rentals, and it charges a flat-rate annual subscription fee instead of a percentage of each transaction. Other options include Homestay, FlipKey, and WINDU. You should explore your options and see which homeshare site is best for you.
Talk to an Airbnb Tax Expert
Taxes can be complicated, especially if you’re running your own business. Get the help and support you need by working with a tax professional who Airbnb hosts and their tax challenges. The experts at Shared Economy Tax have been serving homeshare hosts for years, so they have the expertise and experience that generic tax firms just can’t match. Schedule a free one-on-one strategy session to talk with a Shared Economy Tax expert today. For more Airbnb tax help, subscribe to our newsletter using the form below.
