We are in what you can call a Sharing Economy boom. It seems like every other day, new Sharing Economy platforms are popping up. These innovative companies are addressing issues that real people have and providing smart and efficient solutions. In addition to providing solutions, the are also providing opportunities for everyday people to generate an income. This is changing the way we conduct business, travel, shop, and even care for our pets. With tremendous growth, also comes scrutiny. Scrutiny from the public, from competitors, and government regulatory groups. If you participate in the Sharing Economy you need to know how to protect your Airbnb business.
How To Protect Your Airbnb Business
The success of Airbnb was overnight (pun intended). Airbnb provided two much needed solutions to two different groups of people:
1) Travelers who were in need of more affordable accommodations to choose from
2) People looking to generate income extra income from their homes.
Airbnb has paved the way for many homeowners and renters to make a solid income. Some have even expanded their enterprises to manage multiple listings. Success with Airbnb takes a lot of dedication, attention to detail, and the ability to stay within the legal parameters set forth by both local and federal governments. As Airbnb gained in popularity, certain concerns arose. Issues with affordable housing, zoning, and the plight of existing residents and neighbors. This has led to regulatory efforts by many cities and jurisdictions. As an Airbnb host, it is important to familiarize yourself with the local laws in your area to protect your Airbnb business.
If you are a host or are looking to get into hosting here is what you need to know in order to protect your business.
Familiarize Yourself With Local Laws
The laws regarding short term listings can vary from city to city, and are subject to change. It your responsibility as a host to stay up to date on the latest. Check zoning laws, and make sure your property falls within the limit. In addition, some cities have caps on how many days per year you can make your property available. Failure to comply with local laws can result in expensive penalties, so do your research.
Do You Need A Business License Or Permit?
This too, will vary from city to city. And again it is your responsibility as a host to know if you are required to gain a business license or permit. Not obtaining a business license in a city that requires one comes with stiff penalties, so again please do some research.
Check Your Rental Agreement
If you are a renter and want to be a host, it is important to make sure your landlord is comfortable with you subletting your home. Believe it or not, some landlords are not supportive of the idea of subletting your space. Some lease agreements expressly forbid subletting, and as a repercussion you can be evicted. We recommend checking before listing your place.
The IRS wants all income reported, this includes your side hustle as well. Regardless of the size of your Airbnb enterprise it is your responsibility to report the income you earn. The one exception is the 14 day rule, which states that if you rent your listing for less than 14 days per year, you do not need to report the income.
Some important things to keep in mind:
- You may need to pay estimated taxes if you expect to owe more than $1,000 in taxes.
- Because you are considered self employed, you may need to remit self employed tax.
- You won’t receive a 1099-k unless you reach 20K in revenue and 200 transactions. You will need to keep track of your income and report it accordingly.
- If you do receive a 1099-k make sure you accurately report the income. The IRS also receives a copy of the 1099-k, so they know how much you should be reporting.
- Deductions are your best friend. Your Airbnb business will incur regular expenses that can qualify as deductible expenses. This can help lower your tax burden.
- If you are employed and receive a W-2 you can increase your withholdings to cover the additional taxes you may owe. Or if you expect to have a loss and you’re reporting on a Schedule C as an active trade or business, then you can reduce your withholding since the loss will reduce your taxable income.
- You can pay your taxes online. Learn more about how to pay your taxes here.
Check Your Insurance
How is your homeowners or renters insurance? As an Airbnb host, you run the risk of damages. While most Airbnb guests are great, you may have some that are wilder than others. Having the right amount of insurance to protect your assets is crucial. Even if all of your guests are saints, accidents can and do happen. You can reduce your risk, by increasing your insurance.
Protecting The Health And Safety Of Your Guests
While insurance is a must, it is also important to make sure you are providing safe accommodations to your guests. You can reduce the risk of accidents by making sure your home is safe. Check fire and carbon monoxide detectors, make sure there are clear evacuation routes, make sure your HVAC system is properly functioning, and make any repairs right away. In addition, you should set safe occupancy limits, you may need to check with your local authorities if you are not sure what those should be. Read through Airbnb’s guidelines on responsible hosting for more specifics.
Running your Airbnb business can be very rewarding. It is important to make sure that you are doing all that you can do to protect your Airbnb business. To learn more subscribe to our newsletter.