It’s that time of the year again, at least for US Airbnb hosts. The tax deadline in 2018 is April 17th. The good news is, if you play your cards right, you may not have to pay any taxes on your Airbnb income at all, according to Miguel Centeno, of the Sharing Economy CPA.
Miguel specializes in tax preparations for Airbnb hosts and is licensed to represent taxpayers in all matters before the IRS including the U.S. Tax Court. He also has testified before the U.S. Congress on tax reform as an expert witness for the Sharing Economy.
We will listen to him, because Miguel has a lot of insights to share that can save you money and prevent issues with the IRS.
When should Airbnb hosts file their taxes?
Airbnb hosts have to file their taxes at least once a year and, in some cases even quarterly, depending on how much you make.
Should Airbnb hosts file their taxes under Schedule C or schedule E?
Whether you should file under schedule E or schedule C, depends on how actively involved you are in the business. Schedule E is meant for passive income, for example a property that’s being rented out to long term renters. Airbnb hosts however will typically have to report under Schedule C, as running an Airbnb business involves active involvement of the host, checking people in, managing the listing, etc.
What can Airbnb hosts deduct from their income?
If you rent your home, rent and utilities are two big ones. If you own your home, the mortgage isn’t deductible, but the interest that you pay on the mortgage is. You can also depreciate the value of the home and deduct that amount.
In general there are two categories of expenses, direct expenses and indirect expenses. Direct expenses are expenses made solely for the benefit of the business, bed linnen for example.
Indirect expenses are for the benefit of everyone in the house. For example, if you rent out one room in your house, rent would be an indirect expense. These are partially deductible. The key is to make a reasonable estimate of what part of the rent to deduct, based on the percentage of space you’re renting out.
Items that Airbnb hosts typically forget are subscriptions in your home like Netflix or flowers that you put in your house. The number one deduction that Airbnb hosts miss is travel. When you stay at an Airbnb yourself, it can be considered part of your job as an Airbnb host to do research.
Listen to the podcast episode for more tips on how to save money on your tax return, or contact Miguel directly to receive $50 off your Airbnb tax preparation.
Website: Shared Economy CPA