Some Airbnb hosts are caught off-guard by how much tax they owe on their rental income. However, if you play your cards right, you might find that your taxed Airbnb income is a moneymaker. That’s why we’ve created this guide: to help you properly account for expenses and income, so you can enjoy all the benefits of home-sharing while keeping more money in your pocket.
Here is what you need to know about the taxes if you become an Airbnb.
- Special breaks for occasional hosts
- Active hosts must report rental property income and expenses
- Additional tax responsibilities
Special Breaks For Occasional Hosts
It’s hard to believe, but it’s true. You can rent your home for up to 14 days each year without having to do any additional paperwork or accounting. If you don’t rent your house out more than 14 days per year, the IRS doesn’t want to hear about it. It offers an opportunity for those owners who occasionally rent out their property.
Active Hosts Must Report Rental Property Income And Expenses
If you rent out your residence for more than 14 days in the year, you’re considered an active landlord, and you need to report your rental income and expenses. Report rental income on your federal tax return because rental income is subject to self-employment taxes—report your gross rental income as Other Income on line 21 of Form 1040.
Report any deductible expenses related to renting your home on Schedule E if you itemize. If the costs exceed your gross rental income, you can’t take a loss when filing your tax return. However, if you have other deductible items on Schedule A that exceed the amount of Schedule E deductions that personally offset the passive loss, up to $25,000 of the passive loss can be carried forward to offset future net passive income until it is used up.
Additional Tax Responsibilities
Determining your tax requirements is a hot topic right now, and with good reason! State and local entities are updating their laws to account for the Airbnb community. Typically these laws entail collecting sales tax and occupancy tax from your guests and remitting it to the appropriate taxing authority on their behalf—as well as filing any other required paperwork. Most cities in which we operate have updated their laws, and as a result of this work, Airbnb can collect and remit taxes on behalf of hosts.
As a U.S. citizen, you may receive Form 1099-K, Payment Card, and Third Party Network Transactions from Airbnb showing your earnings for the year from credit card transactions. If Airbnb withholds income tax from your earnings, they will also send a form indicating how much was withheld. Income earned in a foreign country is not directly taxable by the U.S. but could be reported on your tax return and subject to information reporting typically on Form 1099-MISC.