Filing Airbnb tax return is one of the most important parts of the job. It could appear complex but once your doubts are clear you will be able to smoothly file tax returns. The short-term rental business is not excluded from the umbrella of tax collectors and thus you have to be sure to file returns timely and rightly. Let’s learn more about Airbnb tax return.
1. When Do You Need To Pay Taxes On Airbnb Income?
In the U.S if you rent your property for more than 14 days per month then you will have to pay tax on your Airbnb income. In other words, if you are an Airbnb entrepreneur and you run a short term rental business seriously then you have to pay tax on your Airbnb income.
You can also read about Airbnb taxes in Vancouver.
2. How To Figure Out The Amount Of Tax?
Your tax on Airbnb income depends on your income and income estimations. The tax will be calculated on your taxable Airbnb income. To calculate the taxable income you will have to write off the deductible expenses. There is no fixed amount to pay as the Airbnb tax. As a host, you will have to comply with the calculation rules set for rental businesses.
Along with the annual Airbnb tax return, you will also have to pay the tax estimates. You can not overlook the tax estimates. There are various ways to pay the estimates including a quarterly and monthly basis.
3. Are Local Taxes Included In Airbnb Tax Return?
No, local taxes are separate from the federal tax. Apart from the Airbnb tax return, you might have to some local taxes. Local taxes are a part of short-term rental businesses. If you are renting your property regularly then your state will expect some taxes.
Local taxes such as sales and occupancy tax differ from location to location. So, you have to be updated with the latest rates and ensure to pay your dues on time. Airbnb might also help you in collecting and remitting such taxes.
In some cases, Airbnb will add the local tax such as hotel tax to the guest’s bill and do the job on your behalf. However, you will have to go through the terms and conditions to check if your listing is eligible for this service or not.
When your business is set at a particular location you have to comply with the rules and timely pay the taxes. Airbnb is just a platform where you list your property. Your real business is running on the land that you owe taxes. So for smooth functioning take matters into your hand and remember to pay the local taxes separate from the Airbnb tax return. They are not the same.
4. How Can You Deduct Your Taxable Income?
Tax is not applicable on the total amount of your Airbnb income. To reduce the tax amount, you can use business expenses to deduct your taxable income. It may seem complex but it is simple. Your total income is different from the taxable income. When you file for Airbnb tax return remember to write off deductible expenses in order to get your taxable income. For example, if you are furnishing your rental, you can mention the relevant expenses as business expenses and deduct the said amount from your income.
You can write off various expenses. Just be sure that every expense you mention as deductible contributes to your business. Even the Airbnb fees and commissions can be considered as business expenses. The expenditure on promoting your business will also come under deductible expenses. Along with this, you can deduct the property taxes, mortgage interests, and even homeowner’s insurance. So, while filling the tax returns mention every business expense you incurred during the financial year.
One more interesting expense you can use as a deductible is depreciation. As you might know, depreciation is the loss in value of an asset due to wear and tear over years. So, this loss in value is treated as an expense for you which you can calculate and write off in the tax returns.
5. Do You Need To Fill Any Forms For Airbnb Tax Return?
Yes, you have to fill forms in order to file your Airbnb tax return. There are different form types for different scenarios. You can fill Schedule C for business income and Schedule E for passive income. Again, if you are an Airbnb entrepreneur and you run a sole Airbnb rental business then you will have to sill Schedule C. Schedule E will qualify for only those who rent out on Airbnb as a hobby and earn only passive income out of it. Running an Airbnb business and filling Schedule C means you qualify for Self-employment tax as well. So along with filing Airbnb tax return remember to pay the self-employment tax based on your Airbnb income.
6. Is Professional Help Necessary?
It is advisable to take professional advice before filing Airbnb tax return. You can learn the basics about the returns on your own but before filing the returns it’s best to take advice from a professional. Finance is a complex area and expertise will always benefit you. It is not compulsory that you hire a professional for assisting you with Airbnb tax return, but it could be a beneficial decision. Professionals can give you tips on how to save more and how to fill out the forms correctly. If you can afford then definitely go for hiring help.
7. Do You Have To Maintain Any Records?
As you read above you can mention deductibles in the returns, but you have to work a little bit for that. In order to deduct your business expenses, you will need proof and receipts of every expense you are writing off. So, yes you have to maintain records. Filing Airbnb tax return involves paperwork and if you want to get it right you have to be prepared. It is not much just keep safe all your receipts and also maintain a log of days your listing was booked. Such records help you in smoothly filing the returns.
Another important record that you need to keep safe is Form 1099-K that you might receive from
Airbnb. If you have completed more than 200 Airbnb transactions or your income is more than $20000 in the given financial year, then Airbnb will inform the IRS about your income and you will receive Form 1099-K mentioning all the details. Now, keeping this form safe is crucial. You must cross-check the details with your personal record to rectify any kind of error. Furthermore, it will help you in future events.
Filing Airbnb tax Return isn’t an easy job but it’s an essential one. You have to understand the terms nicely and make the right decisions for filing rightly and saving at the same time. For any further clarification on the topic, it is advised to approach a professional.