​​5 Ways Airbnb Hosts Can Maximize Their Tax Deductions

This post is brought to you by Shared Economy Tax.

Everyone knows that running an Airbnb is a lucrative way to make a little bit of extra money on the side or turn it into a full-time occupation. You are running your own business, and if you’re not taking all the tax deductions to which you are entitled, then you’re selling yourself short. To take advantage of the tax benefits of hosting an Airbnb, you need to get organized this tax season. Here are five tips to make tax season easy and maximize your deductions. These are tips you can’t afford to miss.

1. Keep Accurate Records from the Beginning

The best thing you can do is to start organizing from the beginning. Keep records of all bookings, vacancy dates, and other notes so that they will be ready when it comes time to file. This makes tax time easy, and it’s more likely that you will not miss a deduction. Keeping a property calendar is an excellent way to determine if you can take certain deductions and to take advantage of any special programs for which you might qualify.

When getting started, be sure to have a designated place for your tax records. Have a place to store receipts and have a file in your computer for electronic receipts. A little planning and forethought, in the beginning, will save you many hours when it comes time to prepare your taxes or get ready for your accountant. 

2. Use Accelerated Depreciation and Cost Segregation

Depreciation allows you to write off the cost of purchasing or improving your rental property. Depreciation and cost segregation is a deduction that is in addition to any other business expenses you might have. This can significantly add to your Airbnb business deductions.

Also, don’t forget that you can claim a tax deduction on many major equipment purchases, too. Did you purchase a big lawn tractor to maintain the property?  Are you picking guests up from the airport? If you are, then a portion or all of your vehicle might count for this deduction. If you have any questions, you should consult a tax accountant who specializes in Airbnbs for advice about your situation. 

3. Track and Claim All Deductions

This is one of the most important tips. Tracking is the most important factor in making sure that you do not miss out on any important deductions. Make sure to keep receipts for all expenses, even if they’re electronic ones. You can also prorate expenses where necessary. 

You should keep records, such as utility bills, tangible goods provided for guests, and specialized rental and occupancy fees. You should also keep any receipts that are connected to Internet provider bills, expenses involved in websites and advertising.

Don’t forget to keep receipts for any office expenses, too, little things add up. You might only spend $30 on a printer cartridge, but if you do it once a month, that is a $360 deduction. Keeping your receipts in one place will save time as you will not have to look back in bank records to determine these deductions.

4. Reconcile Airbnb 1099-K Forms

One important thing to do is to make sure that all your earnings match what is reported on your Airbnb 1099-K. If you made enough earnings to receive one, it’s important to make sure that everything you report is accurate. Otherwise, it could cause you not to be able to take a deduction or could put you in a higher tax bracket.

To receive a 1099-K, you must earn over $20,000 in a calendar year, and you must have completed 200 or more transactions. Airbnb will also report your rental income to the IRS, so make sure you keep track of your earnings and deductions to make sure that your records match what the IRS has. 

Some home-sharing platforms will keep a percentage of your earnings, at around 28%, if your W-9 is not filed or properly reported to the IRS. 

5. Get Professional Tax Advice

The next most important thing that you can do before filing your taxes this year is to get professional tax advice. Renting your home for income is different from going to work at a job where you get a W-2. Airbnb income can be complex, and you need a tax specialist who understands the nuances of filing your taxes to maximize your deductions and don’t incur any penalties.  

Airbnb income requires you to have an intimate understanding of how to treat rental property income in various states, localities, and tax jurisdictions. Our professionals can make sure that you meet all the requirements and help you identify all potential deductions to which you are entitled. The main thing is to make sure that you have all your records together to save time and make sure your tax pro knows the deductions that you have. 

Shared Economy Tax Pro specializes in helping Airbnb businesses maximize their tax deductions and file their taxes correctly. Through the years, Shared Economy Tax Pro has saved clients a substantial amount of money by helping make sure that all the tax deductions are identified. We understand that every business is different, and we can help you identify deductions that apply to your unique circumstances. 

Making tax time easy begins with keeping organized records, but that is not the only thing you need to do to prepare for this tax season. We can help you develop a personalized tax strategy to help maximize your savings and allow your business to grow. We specialize in tax planning for home share hosts. Our advisors have expertise in your business and what it needs to succeed. 

If you are ready to get a jumpstart on this year’s tax season, it’s time to contact us for a no-obligation, one-on-one strategy session with one of our Shared Economy Tax Pro specialists. Be sure to sign up for our newsletter below for more free tax tips.