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Airbnb Taxes: Schedule C or Schedule E?

Airbnb Taxes: Schedule C or Schedule E?

Airbnb Taxes

As an Airbnb host, you're pretty busy with taking care of your guests, responding to messages and running your Airbnb listing. Keeping track of financials and expenses is probably not your favorite activity, let alone doing filing your Airbnb taxes.

You'll find lots of Google hits for the questions “is Airbnb Schedule C or E?” or “Is My Airbnb Subject to The Self-Employment Tax?”. And yes, you do have to report your Airbnb earnings.

Doing your taxes right is vital to the health of your Airbnb business.

Plus, proper financial planning can save you a lot of money, allowing you to make the appropriate tax deductions when it's time to do your taxes. How does this work? Find out in this post.

Disclaimer: I am not a tax professional. Please consult a CPA or accountant for more information.

Filing Your Airbnb Taxes: How does it work?

Every Airbnb host will receive a 1099-K form from Airbnb. They don't withhold any taxes on your behalf, it's your responsibility to pay the taxes. That's why it's smart to reserve part of your Airbnb income each month to cover these taxes at the end of the year.

Airbnb also sends the 1099 form to the IRS, so they know exactly how much money Airbnb has paid you. Therefore, you should make sure that what you report matches what is shown on your 1099. The IRS does automated checks to see if it matches and if it doesn't you may be audited.

Rental vs Business: Schedule C or Schedule E?

Depending on how you run your Airbnb business, you have know whether your Airbnb income is Schedule C or schedule E. The distinction is based on how actively you are involved in running your Airbnb business and what services you offer.

You may be wondering what Schedule E means. According to the IRS: “Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.”

Schedule E is meant for passive income. If you are just renting out a space and you do not offer any additional services (cooking, cleaning services, maid service etc.) then you should report on Schedule E.

If you do provide services, like a hotel or B&B would, then you report on Schedule C.

The main difference between these schedules is that under Schedule C you are subject to self-employment tax and under Schedule E you are most likely subject to Passive Activity Loss Limitations, which means that your rental deductions cannot exceed your rental income. In other words, the IRS assumes you're never running at a loss. If you're not, then you can deduct up to $25,000 regardless of your income.

Deductible expenses for Airbnb hosts

In order to figure out what expenses you can deduct against your income, you first need to determine whether your property is classified as a personal residence or a rental unit.

Your property is considered a personal residence if

– you rent it out less than 15 days (in which case you don't have to report any income)
– if you rent it out for more than 15 days and you use it for more than 15 days or more than 10% of the total days you rent it to others.

Are you still with me? To simplify, the vast majority of Airbnb hosts's spaces will be classified as a personal residence. This means that you can only expense the portion of expenses related to rental activities. If you own your home, you can also subtract homeowners deductions.

Things you can deduct as an Airbnb host:

– Airbnb commission
– Food & beverages for guests
– Laptop, cell phone
– Car: gas, oil, maintenance (standard car mileage)
– Home: rent, electricity, utilities, insurance
– Condo, HOA Fees
– Cleaning and trash removal
– Maintenance and repairs

For homeowners only:

– Mortgage interest
– Real Estate taxes
– Private mortgage insurance
– Depreciation

Pro-tip: Make sure you have clear documentation of everything you deduct. For example, if you deduct phone expenses, you should have a breakdown of your phone bill.

Use a separate bank account for your Airbnb business

Mixing up personal and business expenses is a recipe for disaster. Open up a separate account and use it to deposit your Airbnb income and pay all expenses you incur as a host. When you need the money to cover personal expenses, you can write yourself a check from your business account. This will save you a lot of time when filing your Airbnb taxes and claiming deductions.

Special offer: Get $50 off on your tax preparation with the Shared Economy CPA.

Useful links:

Schedule C form
Schedule E form
IRS publication 1099
IRS publication 583 (record keeping)
Passive activity loss limitations

Learn more:

Listen to this podcast episode on tax advice for Airbnb hosts with Derek Davis.

Disclaimer: The information contained in this article is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial advisor or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.

Questions about Airbnb taxes? Comment below and I'll get an expert to answer it!

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18 Comments

  1. Ally says:

    Is like some clarity on deductions available to hosts renting one bedroom in their personal home. This site made me feel I could deduct ALL of the expenses of the home. Right now I deduct the % the room is of my home. I have not deducted auto expenses although I DO pick up some guests for free at the airport.
    Thank you for this site.
    Ally

  2. Jasper says:

    Hi Ally,

    although I can’t give specific advice on this because I’m not a certified accountant in the US, Hurdlr does have a tax guide for hosts written by their in house cpa which answers this question. Grab your copy here: http://hurdlr.com/blog/airbnb/airbnb-taxes/

    Hope that helps!

    Best,
    Jasper

  3. Chrisotpher says:

    I rent out my rented apartment via AirBnb for more than 15 days. Can I deduct the hotel that I stay at, when I am renting out my apartment? Is that a business expense? I cannot stay in my apartment, because I am renting it out, so I need to find a hotel to stay in.
    Thanks

  4. Jasper says:

    Hi Christopher,

    this depends on wether you deduct your rent or not. If you don’t then yes, if you do, then no.

    Let me know if you have any other questions.

    – Jasper

    • Adrian Lee says:

      Jasper ~
      Please clarify for me. If I own my home, I rent it for 30 days of the year, and my wife and I stay in a hotel during the rental periods, can I deduct those hotel expenses and, if “yes”, where (i.e. which IRS form) do we itemize them? I plan to deduct (prorate) mortgage interest, property taxes and utilities.
      Thanks!

      • I’d add that as long as a deduction is ordinary and necessary, you can deduct these expenses since they’re required for you to keep your place available and be a good host. I would deduct them under travel in the Schedule C

  5. ray Saxena says:

    Hi I am renting out a room in the apartment I’m renting. Can I deduct the rent I’m paying from the money I make on renting the room? I also live in the apartment. Currently I barely make half the rent on airbnb: now that airbnb is charging me with 30 percent tax I”m not going to be able to make even half the rent. Which makes me re- think my ability to continue hosting.

    Thankyou in advance

  6. Rachel Fedor says:

    Hi Jasper,

    I realize That airbnb does not collect and remit income taxes for us but do they collect and remit the sales and lodging tax (bed tax) for us? My state has a total of 7% bed tax and it has to be filed quarterly. I am listed on airbnb and vrbo; vrbo allows us to charge our 7% and then shows the tax amount on each booking which you can then easily set aside for the end of the quarter. I have not been able to find a clear answer on airbnb. I am running my home rental as a licensed, insured business. Thank you for your work here 🙂

    • Rachel, first of all your listing is beautiful, great work. With regards to occupancy taxes, there’s a lot changing so you might want to check to see if now Airbnb collects this on your behalf. If not, then you’ll need to adjust your listing price on Airbnb to cover that and calculate it yourself. You can actually check to see if Airbnb withholds transient occupancy taxes (commonly referred to as TOT) in your earnings history. In a far right column, you should be able to see whether there’s tax taken out from gross earnings.

  7. Sabrina Martin says:

    I purchased a home to be used exclusively as an Air BnB. Would I treat this as a rental property or a business? I’m confused, help!

    • Jasper says:

      Hi Sabrina, I’m talking to a tax expert soon on the podcast, I’ll ask this question for you.

    • Hi Sabrina,
      Thanks for the question. Jasper did ask on our podcast together and I appreciate the question. The short answer is that you can treat it as both. It is your property (asset) that you can use to generate business income and therefore you can deduct expenses that you incur in conducting that business so long as they’re not personal.

  8. Tony says:

    Last year we had a $515 loss through AirB&B which required us to fill out an 8582 and list it as (c) Unallowed on Worksheet 5. This year, we had $4495 in rents and $4178 in expenses so we made a little—$317—and want to apply the carryover from last year to cancel this out. The IRS instructions for doing this are confusing at best. Does this sound right: Form 8582: 3a = 317, 3c = (515), 3d = (198), 4 = (198), 15 = 317, 16 = 317; Worksheet 3: (a) = 317, (c) = 515, (e) = 198; Worksheet 5: (a) =198, (b) = 1.00, (c) = 198; Schedule E: 21 = 317, 22 = (317), 24 = 317, 25 = (317) 26 = 0. We then have a 198 carryover for next year?

  9. argyle beardsley says:

    if I had guests staying 277 days in 2017, what proportion of my utility bills do I count as an expense for tax prep?

    • miguel says:

      Hi Argyle – Probably a good amount, but a few more factors involved like square footage. If the exclusive rental space is 50%, then you would do space % * time %, so in this case I would take 50% * (277/365) = 50% * 76% = 38%. This applies generally so it’s not a specific answer but should give you a sense of how it works.

  10. Amy says:

    I had some work done to my Airbnb property for 49,500 and my gross income was 39,000. I provide wine, and offer mid cleaning though barely used. Could I still use a schedule c? Also my tax provider used a schedule e last year and additionally we have a depreciation as it is a newly built property.

  11. Miguel says:

    Hi Amy – A schedule C will get you a far better return with a loss. Seeing that you’ve invested quite a bit into your property and are depreciating it, you should be good. Feel free to reach out to us at Shared Economy Tax as well if you’d like to connect.

    Best,
    Miguel

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