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Taxes can be a confusing subject if you rent out your home on Airbnb, especially if you got incorporated.  If you determine that your Airbnb Income is classified as Passive Income, there are a few tips to look out for when preparing your tax return. Here are a few tips when preparing your tax return:

  • If you are incorporated as a partnership, you will need to fill out Tax Form 1065.  Additionally, you will want to record all of your income on Tax Form 8825 (for real estate income).  All income and related expenses should be recorded on the 8825 Tax Form.
  • You will be personally paid based on your proportionate share of income and losses as outlined in your operating agreement. The portion of income and losses will be reported on your Schedule K-1.  The Schedule K-1 will then flow into your personal 1040 tax return. 
  • You may find it surprising that your Airbnb income reported on Tax Form 8825 did not show up on the first page of your 1065 Tax Form.  Don’t worry!  This is normal and page 1 of your 1065 tax form will simply contain gross receipts or sales of your partnership, NOT income related to the rental property income (which is what Airbnb is technically). 
  • You will need to compute a Balance Sheet for your Airbnb investments and your assets should equal your liability + shareholders equity.
  • If you split your Airbnb income with friends or family, and one person has more than 50 percent interest in the profits or losses, you will need to fill out Schedule B-1: Information on Partners Owning 50% or More of the Partnership.

Lastly, don’t forget to fill out a state return for whichever state that you have the Airbnb rentals and had income!