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I’m a US-based host who ended up losing money on my AirBnB in 2020. I invested in some reannotations to my BnB improvements in early 2020, and then covid hit and I stopped hosting. I’m not planning on hosting in 2021. I had a business license and everything was by-the-book.
Is anyone else in a similar situation? How’d you approach it in your taxes?
Caveat, U. S. Only:
Beneficial to report all your expenses on your taxes.
If you file Schedule C (sole proprietor), your loss lowers your other taxable income (such as wages, taxable pension portion, taxable retirement withdrawals), therefore lower taxes.
If you file Schedule E (rental), you have a passive loss. If you meet certain criteria, you can take up to $25,000 in passive losses against active income. Otherwise you must take passive losses only against passive gains (such as a rental that makes a profit or partnership income). You can carry the passive losses forward against future years’ passive income.
If you have so many personal days that you don’t qualify for rental passive losses, you can still carry forward excess expenses to offset future years’ profit.
There are a number of provisions that allow you to expense capital improvements all in one year rather than depreciate them over several years (such as bonus depreciation, 179 expenses, small taxpayer safe harbor), front-loading your tax reduction from expenses.
For discussion purposes only, not professional tax advice.
Thank you, this is the type of discussion I was looking for.
I only hosted 9 nights in 2020, so the rest of the year would be considered personal days.
Unsurprisingly, AirBnB did not send me a 1099-K because I made (much much) less than $20,000. I know I am still responsible for declaring this income. I did find it interesting that they sent a 1099-K for payout I received in May as a part of the “Superhost relief fund.” I had almost forgotten about receiving this boon.
I use an accountant, and would recommend that you do as well. You can carry forward losses, so if you plan on hosting in the future, there may be a benefit. If you have been claiming depreciation on the property, then the losses can count agains the gain.
Once again, I am not an accountant but I use one. I good one is worth the fee. Find one that has experience in rental property.
Thanks for the reminder! I could not recall what the minimum was. Those who typically rent <15 days every year probably aren’t meant to write off their renovations as business losses.
I think I’m done hosting, at least for 2-3 years, so I may consult with an accountant. My taxes are usually simple and straight forward, but 2020 was an unusually complicated year for a variety of reasons.