Q1 collects taxes from guests when booking for rental properties in the United States. Whether you are renting out a spare room, a vacation home or your entire home while you are away, it is important to know how to report your Airbnb or your short term rental income on your taxes. Doing it correctly can save you from penalties and even help you maximize your deductions.
When you rent out property on a short term basis; whether through Airbnb, Vrbo, booking,com or similar platforms, any money you make from it generally counts as taxable income.
The IRS considers rental income to include:
- Nightly rental fees
- Security deposits
- Cleaning fees
- Additional guest charges.
In most cases, you will receive a Form 1099-K or 1099-MISC from Airbnb if your earnings meet the IRS reporting threshold. Even if you do not receive a form, you are still required ti report the income.
Step-by-step guide on how to file taxes for Airbnb.
A number of new Airbnb hosts are unsure about how to go about filing their taxes. This procedure gives you a comprehensive guide on how to go about taxes in simple steps.
Check your tax status.
Confirm if Airbnb is withholding taxes for you and this depends on if you gave them your form W- 9.
Without the form W-9, airbnb may hold 24-28% of your income for taxes and submit them to the IRS. So, check the summary of your earnings to see if taxes are being withheld.
Gather your tax documents.
Airbnb hosts usually receive either a Form 1099-K or 1099-NEC, depending on their earnings and transactions. If you did not receive any, still report your income regardless.
- Form 1099-K is for people who earn $20,000 and have over 200 bookings per year. It shows your gross earning from Airbnb.
- Form 1099-NEC is if you earned $600 or more from airbnb services, like being a tour guide or offering photography. It is used to show earnings from these services, not from renting out property.
Take the steps below if you did not get a form 1099 from IRS;
- Check your account information
- Verify status
- Calculate your earnings. This is because the IRS is not mandated to send you a form 1099 if you earn less than $600. This does not prevent you from reporting your taxable earnings to the IRS.
Report your income.
Regardless of whether you got a form 1099 or not, you are mandated to report any taxable income to the IRS.
Calculate deductible expenses.
These deductible expenses include:
- Cleaning fees
- Maintenance and repair
- Utilities
- Airbnb service fees.
- Photographers fees
And so on.
Check task obligations.
As an airbnb host, you are subject to taxes such as social security taxes and medicare taxes which totals to approximately 15.3 percent of your airbnb income. The host should be aware about local taxes like occupancy taxes, local sale taxes etc that can be incurred through short term rentals.
Sometimes, Airbnb may assist to pay these taxes directly to the government authorities on behalf of the customers.
According to the 14-days rule, you are not to pay taxes on any short term rental if:
- You rent your home for no more than 14 days during the year.
- You use the home yourself for 14 days or more during the year or at least 10% of the total days you rent it to others.
Utilize tax software.
Using these softwares means that you’d be able to sort out paying your taxes yourself without any issues.
Prepare for quarterly estimated taxes.
To calculate your quarterly estimated taxes as an airbnb host, estimate your total tax liability for the year, then divide the amount by four to determine each quarterly payments.
The IRS has specific due dates for these quarterly payments:
- Quarter 1: Due on April 15th
- Quarter 2: Due on July 15th
- Quarter 3: Due on September 15th
- Quarter 4: Due on January 15th of the following year
