- How much to report: The IRS treats your Airbnb like any other independent contractor income. You will receive a Form 1099-K at the end of the year. It lists the gross earnings from your hosting business. This Form 1099-K has also been reported to the Internal Revenue Service. The IRS has implemented a form matching program, so reporting the full amount of earnings on your tax return is vitally important; if the number you report on your return does not match your 1099, you will get an IRS letter. Keep in mind that the gross amount reported does not include hosting fees or occupancy taxes that have been withheld from their payments to you. Before you file your return, access your Airbnb dashboard and download all of the expenses that you have incurred through your Airbnb. Your return will also include other deductions for your Airbnb. You will not get an automatic IRS letter if the number reported on your tax return is below the amount reported on your 1099, but you will get a letter from the IRS if this number reported on your tax return is less than your 1099.
- What to Deduct: A deduction is usually an expense that is incurred to help you generate more income. This helps you reduce how much tax you will end up paying. A few examples of Ordinary and Necessary deductions for your Airbnb may include:
- Mortgage payments or monthly lease payments
- Sheets, linens, towels or other soft goods purchased for your guest’s use
- Cleaning fees
- Netflix/Hulu/entertainment service costs
- Mileage – keeping track of your mileage, even if it is to go back & forth from your rental unit, or to the store to purchase supplies, is a valuable deduction.
- Professional fees – yes, what you pay to the pros to keep track of your taxes is a deduction!
- Hosting-specific apps and online tools you use to run your business
- Depreciation – If you purchased a bed, a desk, or drawers for the exclusive use of your Airbnb, you will not only get a depreciation deduction, but you may be able to write off the entire purchase!
- Food – This is a great little deduction if you provide food for your guests. Be sure to keep track of business vs. personal.
An excellent tax app that helps you maximize your tax deductions is called Bonsai.
- If you miss the deadline: The date to file your extended return is October 15th. After the extension date, electronic returns are no longer accepted, leaving you with no choice but to file via a paper return and increasing your odds of an IRS audit. Last but not least, if you still owe taxes, but cannot pay, you can always set up a payment plan with the IRS, but you have to stay current on all other tax years, which includes estimated tax payments.
Approximately 10 million individuals file an extension. If you’re one of them and an Airbnb host, we compiled 3 tax considerations for your airbnb tax return extension: