Being an Airbnb host or vacation rental owner can be a lucrative side gig, but it also comes with the responsibility of filing taxes. If you're renting out a property, it's important to understand how the IRS treats your rental income and what deductions you can claim to reduce your taxable income.
1. Report Your Rental Income
First things first: the IRS expects you to report the income you earn from your rental property. This includes not just the rent paid by guests, but also any cleaning fees, service fees, or other charges associated with the booking. It doesn’t matter if you rent out your property for a few days or a few months — this income is taxable.
2. Determine if You Qualify as a Business or Hobby
The IRS distinguishes between rental properties treated as a business (e.g., short-term rentals) and those treated as a hobby (e.g., renting out a room occasionally). If you're a frequent host or make substantial income from your property, you’re likely considered to be running a business. This has tax implications, as business owners can deduct more expenses compared to hobbyists.
3. Claim Rental Property Deductions
As a rental property owner, you can deduct a wide range of expenses. Common deductions include:
- Mortgage interest
- Property taxes
- Insurance
- Maintenance and repairs
- Utilities (if you pay them)
- Property management fees
- Depreciation on the property itself
Keep detailed records of all these expenses throughout the year. You may need to provide receipts or other documentation to back up your deductions during tax season.
4. Understand the 14-Day Rule
Did you know there’s a rule called the “14-day rule”? If you rent out your property for fewer than 15 days during the year, you don’t need to report the rental income. But if you rent out your property for more than 14 days, you must report all rental income on your tax return.
5. Special Considerations for Short-Term Rentals
If you're hosting on platforms like Airbnb, you might be subject to additional taxes, such as sales tax or occupancy tax, depending on your location. Make sure to check your local tax regulations to determine what additional taxes apply to your rental business. Airbnb may also collect and remit these taxes on your behalf in certain locations, but it’s important to double-check.
Statistics: Airbnb Hosts and Tax Filing
According to a recent study, 1 in 5 Airbnb hosts report paying taxes on their rental income, but nearly 40% don’t track their expenses or consult tax professionals. This highlights the importance of keeping good records and seeking professional advice to ensure you’re claiming all possible deductions.
6. Get Help With Life Planner
Managing the finances of an Airbnb property can be tricky, especially when it comes to keeping track of income, expenses, and deductions. Life Planner is here to help. With its expense tracking tools and budgeting features, Life Planner makes it easier to stay on top of your property’s finances throughout the year. Plus, you can link your Airbnb account to track income and deductions automatically, so you never miss a tax break.
Ready to make your tax season stress-free? Download Life Planner today!
Here’s how:
Life Planner’s features, including detailed financial reports, budgeting tools, and expense tracking, make tax season a breeze for Airbnb hosts and vacation rental owners. Download the app and simplify your financial life today!