Understanding the tax consequences of renting property on Airbnb and VRBO is not exactly a straightforward process. Whether or not you will need to pay taxes depends on how many days you rent your property during the year, how much you earn, and where your property is located, among other factors.
Regardless of your earnings on these platforms, it’s important that you get organized now so that you don’t risk filing your taxes incorrectly, owing late fees and penalties, or having to scramble last minute. To help you get started, here is a quick overview of what you need to know about paying taxes on Airbnb and VRBO income.
What Every Airbnb & VRBO Host Need To Know About Taxes
All Airbnb and VRBO hosts should be aware of the fact that they may be subject to federal, state, and local taxes on their short-term rental earnings. As a result, it’s important for Airbnb and VRBO hosts to familiarize themselves with all tax regulations that are applicable to short-term rentals in their area.
Although short-term rental hosts could avoid having to pay income taxes if they are eligible for the 14-day rule, in most cases the majority of hosts will owe income taxes on their earnings. You will need to calculate your earnings and report them to the IRS even if Airbnb and VRBO do not issue you a Form 1099.
If you owe income tax on your short-term rental earnings and the amount of income tax that you’ll owe for the year when considering all of your sources of income is greater than $1,000, you will be required to make estimated tax payments. Estimated tax payments are not made on tax day, instead, they are made three times during the current year with the final payment due in the following year.
However, if you have a full-time job, you may be able to avoid having to pay estimated taxes on your Airbnb income simply by having more federal income tax withheld from your paychecks. This can be done by requesting additional tax withholding from your employer using Form W-4.
In addition to income taxes, short-term rental hosts may also be required to pay lodging/occupancy taxes on their bookings. VRBO and Airbnb will collect and remit taxes on your behalf if your property is located in certain jurisdictions by deducting them directly from your earnings after a guest places a booking.
For a complete list of the jurisdictions where VRBO automatically deducts taxes from hosts’ earnings, click here. The list of jurisdictions for occupancy tax collection and remittance for Airbnb is available here.
Do I Get A 1099 From Airbnb & VRBO?
Airbnb issues a Form 1099-K to all hosts who earn more than $20,000 and have processed 200+ transactions in a calendar year. VRBO’s card processor, YapStone, only issues a Form 1099-K if you processed more than $20,000 and 200 transactions in gross payments for the calendar year.
If you do not meet this threshold, you will not receive a 1099 from Airbnb or VRBO.
What Kind Of Expenses Can Be Deducted?
As a short-term rental host, you can deduct the expenses related to managing your business and providing services and amenities to your guests. Typical deductible expenses include repairs and maintenance, cleaning service costs, mortgage interest, property insurance, advertising costs, and the cost of furniture and various household supplies.
You are also permitted to deduct the service fees that VRBO and Airbnb charge you on each booking. Finally, if you use a room in your home to manage your short-term rental business, you may also be eligible to claim a home office deduction.