Airbnb Tax Preparation: Everything You Need to Know
Airbnb tax preparation can seem very daunting. Before starting any business venture, it is always advised that thorough research be conducted on any national taxes involved, and the associated rules and regulations. The same goes for Airbnb rental business.
We recommend 100% transparency and accuracy while providing tax-related information about your business. This will definitely help you as your Airbnb Business Profile grows.
How do you report Airbnb income on your tax return? This is one of the biggest questions that new Airbnb hosts face. Professional Airbnb hosts that are earning significant amounts of money from the platform should be proactive in Airbnb tax preparation so that they aren’t blindsided by Airbnb taxes when April rolls around.
Airbnb Tax Preparation
In this article, we shall guide you regarding Airbnb Tax Preparation.
- 14-Day Rule: With short-term rentals, there are no taxes involved. Looks great. Isn’t it? The rule says that if you rent your property for no more than 14 days a year, you don’t have to pay taxes on your rental income provided that you also use the vacation home yourself for 14 days or more during the entire year or at least 10% of the days for which you rent it to others.
- Renting partially: Make it clear that even if you rent only one room of your home, the 14-day rule still applies in the same way as it would have been if you had rented your entire home. In case, the whole rental period is fourteen days or less in a year, there is no need for reporting the income on your taxes.
- Keep your records updated: Especially for short term renting, to keep a transparent record is very important. Make sure that you maintain a complete record of the exact rental days and the days in which you stayed at home yourself.
- Document all expenses: Clarity and transparency, you see, is the key to effective Airbnb tax preparation and management. You are entitled to deduct all ‘ordinary and necessary’ expenses from your rental income. These expenses include money spent on routine maintenance, the hospitality of guests, etc. Whatever it is, we recommend that you document your expenses properly, so that you don’t have to show credit card statements as proof to the IRS.
- Fill in the form W-9 Taxpayer Identification Number: Airbnb and other rental business companies usually withhold 28% of your rental income, if they are not provided with a W-9 form. So, we suggest that you file the W-9 form immediately as soon as possible to reduce the threshold of the amount being withheld by the company.
- Local Taxes: In addition to the federal taxes, there might be other local taxes that need to be taken care of as well. To determine these taxes exactly, we recommend that you get in touch with the local tax authorities. Usually, the Airbnb local taxes include the sales tax and occupancy tax. However, in certain jurisdictions, Airbnb itself collects and remits occupancy tax on your behalf, meaning hereby that taxes will be automatically added to the bill of your guests. However, even if that is not the case, it is your responsibility to pay the local taxes.
Airbnb Tax Preparation- Final Word
Like any other business, Airbnb Tax preparation isn’t easy. But if it becomes complicated for you to handle, it is always recommended to take help from tax professionals in managing your Airbnb tax returns. Once you streamline them, things will fall in place gradually.
So that’s all about Airbnb Tax Preparation, want to know more about Airbnb, you can try to read Airbnb Growth Hacking.