Airbnb is Taxable Income
Any money you make from Airbnb listings is regarded as income by the IRS. That means you will have to declare Airbnb revenue on your federal and state income tax returns, but it will not automatically increase your taxes.
The first; and most important, step Airbnb hosts need to take is to fill out the appropriate tax form at Airbnb’s website. US citizens; or permanent residents, will usually have to fill out a W-9, while non-US citizens will have to fill out a Form W-8ECI or W-8BEN. Airbnb will tell you which form you need to use.
These forms can be accessed at the Payout Preferences section in your Airbnb host account (https://www.airbnb.com/users/payout_preferences). Filling them out is vital, because the IRS bases your taxes on them. If your Airbnb properties are owned through a corporation; such as an LLC, you will have to fill out a W-9 for it.
How to Declare Airbnb Expenses
The bad news is that you will have to pay taxes on Airbnb — the good news is that you can cut your tax bill by declaring expenses. Any money you spend on your Airbnb is considered a business expense that is potentially deductible.
To claim the deductions you will need to fill out a profit and loss form; a Schedule C or Schedule C-EZ. This is simply a list of all the expenses you incurred from the business. IRS publications 334 and 535 explain what can be deducted. These documents are available for free from at the IRS website.
Something to remember here is that any fee you pay to Airbnb, an Airbnb management service, a cleaning service or even a fee for a factoring service like Payfully might be a deductible expense. This means you will have to keep a record of all your expenses.
A cheap and easy way to keep such a record is to simply use one credit or debit card to pay all Airbnb related bills and expenses. The statement will provide an easy to access list you can transfer to the Schedule C.
How the IRS Classifies Airbnb Hosts
How the IRS classifies you can determine how much money you can deduct from your taxes. Airbnb hosts need to be very careful here because the IRS can classify them as “real-estate professionals.”
The IRS considers you a “real estate professional” if:
- You make more than half of your income from real-estate related activities. This includes short-term rentals, regular rental properties and work as a real estate agent or property manager.
- If you spend more than 750 hours a year working on Airbnb, and/or other rentals or in the real estate business.
If you qualify as a “real estate professional” you will have to use a different kind of profit loss statement called a Form 8582.
State Income Taxes and Airbnb
The good news is that state income taxes are based on the information on your federal return. That means you can simply use the same information on both returns if your state collects income tax.
If you are still confused by income taxes, simply use a tax software such as Turbo Tax. It will do everything — all you have to do is type in the numbers. To make things even easier accounting software; such as Intuit’s Quickbooks Self-Employed, can keep track of your expenses and handle your taxes for you. Such solutions can be a lifesaver for gig-economy workers like Airbnb hosts.
