4 Tax Planning Tips For Short-Term Rental Hosts

tax planning tips

Airbnb hosting is a first-time business for many, so a lot of hosts aren’t familiar with the intricacies of the tax system. However, a little Airbnb tax planning can help you save a lot of money at the end of the year. You don’t have to overhaul your whole business because a few minor tweaks can make a major difference. Once you understand the system, you can identify the best tax strategies for your business. Tax planning for Airbnb is a complicated subject, so these tax planning tips are just scratching the surface. However, this list is a great place to start for many hosts. Here’s what you need to know:

Defer Income / Accelerate Expenses

As a self-employed individual, you can defer income into the 2016 year and pre-pay expenses that would normally be paid in 2016 into 2015.   You can easily defer your income by setting high minimum payments on your Airbnb account. That way, you only receive income only you’ve built up a nice payment.  This strategy effectively postpones your income from the IRS’s perspective.

For example, setting a higher payment threshold in December allows you to push income back to the following year.  This same rule applies to expenses, but in reverse.  For example: if you can pre-pay items such as rent or other utilities or services you can take the deduction now.  However, if you pay with a credit card, the expense is recorded on the date its charged. It doesn’t matter when you actually pay the bill.

Double-Check Expenses

A good place to help you find forgotten business expenses is your Airbnb dashboard.  The dashboard shows the total fees charged to your account, so it’s a great reference at tax time.  In addition, you can go back through all of your credit card statements and bank statements.  Highlight anything that is home related.  Remember, you can deduct HOA, insurance, and supplies for your rental. You can also deduct vehicle mileage for business use of your car. That includes trips to the stores to purchase items for your Airbnb property.

Section 179 and Bonus Depreciation

The IRS has a very generous tax provision for assets you purchase for the sole purpose of your business.  Tax code Section 179 allows you to depreciate certain types of assets as an immediate expense. That way, you don’t have to gradually depreciate them over several years. Electing to use Section 179 immediately reduces your taxable income.

In addition, you can also claim bonus depreciation to save even more. Try this calculator to see if you qualify for Section 179 deductions. You can also contact us. We’re happy to answer any questions you have.​

Retirement Contributions

As an Airbnb host, you can open special retirement accounts for self-employed individuals. One such account is a Self-Employed Pension IRA. You can deduct SEP-IRA contributions on your tax return, thus lowering your taxable income.  To be eligible, you must be self-employed.  The accounts are easy to set up and maintain with no annual maintenance fees.  You have until April 15 of the following year to fund your account.  You can fund up to 25% of your self-employed compensation, to a maximum of $53,000 for 2015.  Contributing to tax-advantaged retirement accounts helps you build your nest egg and reduce your tax bill.

More Tax Planning Tips

These simple tax planning tips are just the beginning. If you want to develop a truly effective tax strategy, you need professional guidance. The tax pros at Shared Economy Tax specialize in serving Airbnb hosts and other sharing economy entrepreneurs. We can help you develop a customized tax plan that will help you keep more of what’s yours. Don’t worry, it’s easy to get started. Get started today with a free one-on-one strategy session with a Shared Economy Tax expert today. You can also sign up for our newsletter using the form below for more free tax tips. ​

About the Author

Miguel Alexander Centeno

Miguel Alexander Centeno is an author, speaker, and tax leader at Shared Economy Tax. A former Big 4 tax manager, he represents taxpayers in all matters before the IRS, including the U.S. Tax Court. He has been quoted in the Wall Street Journal, Fox Business, and MSNBC on tax related articles and has testified before the U.S. House of Representatives as a part of hearings for the Tax Cuts and Jobs Act. A father of three, Miguel is an avid acoustic guitar player, gravel cyclist and once-a-week yogi.
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