by Michael Lodge
Several of our clients have put their homes, vacation homes, apartments, condo’s up as places to stay for nightly income through airbnb, thus they will need to decide how to report this new income on their tax returns. Some clients think this is free income, they don’t have to report it. So wrong, because you are now running a small business renting out real estate on a nightly, weekly or monthly basis. You are now in business and have to report it correctly.
The IRS already knows that you are getting income from airbnb. At the end of each year airbnb will send you a 1099-K, this is from all of your credit card transactions from customers that paid you for the use of your property. The 1099-K is also sent and reported to the IRS, so they have record of your income that you have to report. Also, this income is subject to self employment tax on your 1040. Some of you may have formed a S-Corp, C-Corp or LLC, or reporting it on a Schedule C – 1040, thus the reporting will be different. If you are filing a 1040 you must report this income on a Schedule C – Business or Profession. Your 1099-K will be reported on the 1099 income section of the Schedule along with any other cash or check income related to the business of operating an airbnb property.
You are allowed to take expense deductions on those costs that deal with the upkeep of the property for the guests and other expenses that you can take as a small business on a Schedule C. Review a Schedule C so you know what are the normal types of deductions a business can take.
Just remember just like Uber and airbnb you are now running a business and have to report this income as a business in some form or fashion that you have set up. If you don’t report it you will be subject to penalties by the IRS as well as self employment taxes that will cost you greatly. Do it right, report it correctly, keep all of your documentation for income and expenses, and enjoy the art of doing business.
If you have any tax questions on this issue send an email to: firstname.lastname@example.org