- Defer your income/Accelerate your expenses. As a self-employed individual, you can defer income into the 2016 year and pre-pay expenses that would normally be paid in 2016 into 2015. To defer your income: one simple way is to set a high minimum payment amount from Airbnb by setting up your limits to receive income only after you hit a certain point. By setting a higher rate, any bookings you had in December, could be actually paid to you in January of the following year. This same rule applies to expenses, but in reverse. For example: if you can pre-pay items such as rent or other utilities or services you can take the deduction now. Keep in mind also that if you use a credit card to pay expenses, the expense is recorded on the date charged, and not when you actually pay the bill.
- Forgotten Expenses. A good place to help you find forgotten business expenses is your Airbnb dashboard. The dashboard to will give you the proper amount of fees that have been charged to you. In addition, you can go back through all of your credit card statements and bank statements. Highlight anything that is home related. Remember, things like HOA or condo fees, insurance and supplies you purchased for the home are all allowable deductions (subject to percentage of use). Additionally, if you drive to and from retail stores to purchase items for your Airbnb property, that is also considered tax deductible.
- Section 179 and Bonus Depreciation Deduction. The IRS has a very generous tax provision for assets you purchase for the sole purpose of your business. It is called “Section 179”, which simply means that instead of depreciating an asset over the allowed life of the property, you can take the full deduction of that asset (such as furniture, improvements to your home or electronics) in the first year, expensing the item and reducing your taxes. In addition, there is also a provision called Bonus depreciation that is offered as an additional incentive for small business owners. To see if qualify and how much money you can save by Section 179, try the calculator here, or contact us for any further questions.
- Retirement contributions. As a 1099 Airbnb host, you can take advantage of the generous funding rules (or simply put, how much you can contribute) for self-employed IRAs. The amount that you fund into your SEP-IRA is shown as a direct adjustment on page 1 of your tax return, lowering your taxable income. To be eligible, you must be self-employed. The accounts are easy to setup and maintain with no annual maintenance fees. You are given until April 15 of the following year to fund your account, even if you have already filed your tax return. You can fund up to 25% of your self-employed compensation, to a maximum of $53,000 for 2015. Contributing to your retirement is an excellent way to save for your later years while reducing what you pay to the IRS right now.
If you have any questions, please feel free to contact us to see how we can help.