03 Feb So you own an AirBnb?
I was recently attempting to live by Axiur’s philosophy by spending the weekend with a few CPA friends skiing and enjoying cabin life. When I got back to reality, a client of mine told me that he had an AirBnb and was interested in talking about what that would look like for him from a taxation perspective. Quite coincidental, as I had just been sleeping in one.
First, it is important to understand that as an AirBnB host you are subject to income tax. Income derived from assets (rental properties) are subject to income tax, and since you as the owner receive the income, you are naturally liable for any tax due.
Because you are subject to tax, you will need to include in your income all amounts you receive as rent. Rent can be thought of as the gross amount of payment received for the use of your property. The taxable amount of your rental income is the aforementioned rent received less any allowable expenses. You will report this income on either Schedule C or E of your personal tax return (Form 1040).
Expenses that are “allowable”:
- Cleaning and Maintenance Costs (laundry, supplies, etc.)
- Utilities (gas, electric, internet, trash collection)
- Property Insurance
- Property Taxes
- Interest on a mortgage that was used to buy or improve your property
- Fees paid to collect rent (AirBnB service charges)
- Travel expenses
So, how do you go about reporting the income and expenses from your AirBnb? In all likelihood, you will report your rental income and expenses on Schedule E. You will list your total income, expenses, and depreciation for each of your properties. Axiur is here to help!
Additionally, you should retain certain documents:
- Receipts for all deductible expenses
- Records of improvements
- A log of how many days your property was rented
- Receipts for repairs
- If you are deducting travel expenses, keep a log!
- List of all depreciable assets
- Property tax forms
- Security deposit information
- 1099-Misc that you issued to independent contractors
And that’s how easy it is! If you do prefer to have some guidance, you can always reach out to us to clarify something or set up a consultation to discuss.
We hope this basic overview was worthwhile, and not overly boring. And on that note, I think we might be looking to book another ski cabin soon!