First Time AirBNB taxes --- HELP!

Regulations/Tax Issues
1

Okay, so I’m very behind with last year’s taxes due to them being more complex and a cascade of family emergencies this year. I began hosting in May of 3
2017. I rented one AirBNB apartment for 2 months and didn’t live there. I also rented my hime where I live for 6-7 months. Total AirBNB income was about $5k. I also bought the home that year and spent a ton setting up, so I have well over $5k in potential deductions. I saw something about deducting up to $25k in AirBNB deductions from your day job wages if your average AirBNB stay was less than 7 days. Is this accurate?

Also, between two AirBNB places, a day job, buying my first home, and a mess of deductions, can I maximize my deductions on the premium TurboTax? Or do I need an actual accountant. I’ve always done my own taxes until now, but I have no idea where to start because I don’t want to buy TurboTax if it won’t work for this weird loophole. Thanks so much!

2

You don’t say what country you’re in so it’s hard for us to comment. You must have a national government tax website with information and FAQs. In the UK HMRC have one with facts on income from property and the rent a room scheme. In the UK there’s no tax cross over to PAYE employment or deductables for the rent a room scheme.

3

If you are late with your tax return and haven’t looked into how your taxes should work, if you can’t get the guidance you need from your government’s tax website, and need to submit your returns urgently, I would pay an accountant for an initial consultation to get clarification on the areas you need advice on.

4

You have a lot going on for the 2017 return! It would be money well spent to have someone do it right; you can use the Airbnb portion as a template if you’d like to do your own in the future. You can also deduct the accountant’s prep fee in next years’ taxes.

(I’m in the USA)

5

Thanks for all the feedback so far! I’m in the US.

6

Patrick we own a b&b in Michigan. We list our rooms also on Airbnb. We set up the business side as a llc. We use the building as a rental. The bnb pays us rent. You don’t pay social security tax on a rental. With a rental you use the schedule for rental on your it’s taxes. You can then depreciate your building and large purchases. Go to a accountant to do all this

7

Agree on use of accountant or enrolled agent. Under US tax code, the $25,000 you are referring to is Schedule E rental income passive loss amount that can be used to offset your active or earned income (W2) under specified MAGI income threshholds. You cannot take the passive loss if you/family spend more than 14 days or 10% of rental days, whichever is greater, in the rental space. Expenses also have to be pro-rated based on rental vs personal days and, if only part of the resudence, square footage, altho there are some nice depeciation accceleration provisions – Section 179, bonus depreciation, and de minimis election. IRS publication 925 on passive loss specifically excludes short term rentals with less than 7 days average stay, and short term rentals between 7 and 30 average days with significant personal services, from the definition of rental activity, which leads accountants to reccommend use of Schedule C profit & loss from business (sole proprietorship) instead of Schedule E. A reputable tax preparer will deal with IRS and cover penalties resulting from errors in tax reporting.