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Tax Responsibilities for Airbnb Hosts

Bedroom rented through Airbnb with a beach view.

If you’ve ever thought about using Airbnb or other short term rental sites to make a little extra money, you’ve probably wondered how it may affect your taxes. If you have to deal with complicated tax forms and record-keeping, you may think the Airbnb income is hardly worth the trouble.

However, depending on your circumstances, the income tax consequences of renting out your home may not be so bad.

Here’s what you need to know about taxes if you become a host through Airbnb.

Special breaks for occasional hosts

If you don’t rent your home or vacation home out more than 14 days per year, the IRS doesn’t want to hear about it. It’s hard to believe, but it’s true.

If you live in a home and rent all or part of it out for a few days here and there (no more than 14 days in a tax year), you don’t need to report the income on your return. You also can’t deduct any expenses for your rental business. But, you can still take your full mortgage interest and property tax deductions if you itemize.

Active hosts must report rental property income and expenses

You must report income and expenses from Airbnb rentals on your tax return if you do the following:

  • rent your house out more than 14 days in a year
  • live in the house for more than the greater of 14 days or 10 percent of the number of days you rent the home

On your tax return, you must appropriately allocate your mortgage interest and property tax deductions between your rental activity and your home. The portion of your mortgage interest and property tax earmarked to your rental business is deducted on Schedule E. The remaining portion is deducted on Schedule A if you itemize deductions.

You can deduct any expenses related to renting your home up to the amount you receive in gross rental income. However, you can’t take a loss from a rental business when you live in the home.

If you report a profit on your income tax return, you probably owe state income tax as well.

Additional tax responsibilities

Some states and localities require you to collect sales tax and occupancy tax from your guests and remit it to the appropriate taxing authorities. Airbnb tells its hosts they are responsible for determining if they are liable for paying these taxes.

In certain locations, Airbnb has started to collect taxes including sales and occupancy tax and remitting it on behalf of the property

Airbnb may report your earnings

As a U.S. citizen, you may receive Form 1099-K, Payment Card and Third Party Network Transactions, from Airbnb showing your earnings for the year from credit card transactions. Airbnb sends Form 1099-K if you earn over $20,000 and have at least 200 or more reservations in the previous year.

If Airbnb withholds income tax from your earnings, they will also send a form indicating how much was withheld.

The IRS also gets a copy of the same forms. It’s important to report all the income shown on your Form 1099-K or attach an explanation for why you didn’t to your tax return.

About Sally Herigstad

Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.