Hi hosts!
This last week my husband and I went to our CPA for a meeting to discuss the things that will be changing in our financial situation over the next year. I left there with my head spinning! It’s so wild to me how complicated everything can get when it comes to taxes.
Why does it seem like there are so many possible answers to one question?
It’s math – how can there be some many different answers?!? 😊
My husband is starting a new business so that is part of the reason things feel so complicated right now. There are new things we need to understand and do in order to stay on track with this new business.
If you are just starting as an Airbnb host, you may be feeling the same way. A quick search online or through some Facebook host groups will reveal a wide range of different answers to the same questions about taxes. I remember feeling overwhelmed and unsure about what to do for taxes when I first started my short-term rental. I read one book about taxes for Airbnb hosts and decided right then that I needed professional help!
I am not a CPA! Make sure you get your real tax advice from someone who is qualified to provide it. I am simply going to go through some of the things that you should think about as a host so you have the right questions to ask when you go and see your CPA.
Questions to Consider When Prepping Your Taxes as an Airbnb Host:
Do I need a CPA as a short-term rental host?
Yes. Please work with a pro. It does cost more initially than doing your taxes on your own. However, we have found time and time again that our CPA saves us money in the long-run because she understands taxes better than we do. She knows what to look for when it comes to deductions and finding us tax savings. It also makes me feel calmer and more confident when it is time to file taxes.
Will Airbnb send me any type of tax information?
Yes. As of 2024, if you make $5,000 in gross transactions through Airbnb over the course of the year, you will receive a 1099-K from Airbnb. Previously, that threshold was higher. If you made less than $5,000 gross you should still document your earnings and give that info to your CPA. Your expenses may offset the earnings but you can have problems down the line if you do not report things properly.
There are some situations where you may get some other types of tax forms. You can read about the specifics in this article provided by Airbnb.
I went into more depth on this topic in a recent video.
What expenses do I need to keep up with as an Airbnb host?
I keep up with everything on a profit and loss spreadsheet and then give that to my CPA. She then takes that information and reports it properly. The way you report an expense – like toilet paper – for your Airbnb is different than the way you report your mileage. Repairs to your property or a large appliance purchase can also have unique elements to how you report them. You have to be careful when it comes to repairs versus improvements on the property – they are categorized differently when it comes to taxes. Some large appliance purchases can be depreciated over time – it may be better to do that instead of reporting the whole cost right away. Can you see how quickly this gets complicated? If you do not understand these nuances you may end up paying more taxes or report something incorrectly and end up with penalties and fees down the line. So, I keep up with everything in my spreadsheet and then let me CPA categorize them correctly. You can get the exact spreadsheet I use by going to the shop on my website or visiting my ETSY store.
Here is a link to the STR Profit and Loss Spreadsheet I use: Click Here
Or, get it on ETSY: Click Here
Below is a video of me going through the spreadsheet. You can watch it and get an idea of what it offers.
Does Airbnb remit some of the taxes for me?
Many of the rules about taxes in relation to your short-term rental are set by your state and local government. Because of this, there is not a single answer to this question. In my area, Airbnb automatically collects and remits occupancy tax on my behalf. (Includes VAT/GST and occupancy tax on supply.) Your area may require that you remit some taxes directly to them on a regular basis. Do your homework on this one! You may need to reach out to your state/county/city to double check the rule related to occupancy taxes, etc.
Do I need to send my cleaner a 1099?
If you kept the same cleaning person throughout the year, it is highly likely that you need to send them a 1099. You should file a 1099 for any person you pay over $600 throughout the year. That is $600 or more across all transactions. You can learn more about how to determine who needs a 1099 – and how to create a 1099 – by watching my video on the topic. This was overwhelming for me at first, but it was no big deal once I took the time to sit down and figure it out.
When it comes to taxes, is having a short-term rental the same as having a long-term rental?
No, these two things are different when it comes to taxes. From my understanding, long-term rentals are considered more of a passive type of income while short-term rentals can be more active. Your CPA may ask you if you ‘materially participate’ in your short-term rental. In other words, do you actively manage it? If so, your CPA may have you keep up with the amount of time you spend doing things for your property.
I know it can be frustrating not to have a direct answer to all of your questions about taxes related to running your Airbnb. There are a ton of factors that impact how much you end up paying in taxes. Ultimately, my advice is to hire a professional to help you with your taxes, keep up with all Airbnb related expenses throughout the year (so you’re not overwhelmed or missing things when tax time comes), and take the time to learn about the requirements in your area.
I hope you aren’t feeling overwhelmed! Yes, there is a lot to consider, but there is help available. I hope this article got you thinking and that you have a list of questions to ask your CPA as you prepare to file your taxes your first year as a host.