Hi all,
I’m pretty new to hosting and I’m curious on what are some good ways to file my taxes. I rent out a room and I know there are certain rules on personal use and percentage use for deductions etc. Anybody have any suggestions?
Congratulations on hosting! The right way to file your taxes is to report your Airbnb earnings on Schedule C as a business activity and report all your Airbnb related expenditures like the 3% Airbnb fees (Airbnb included this fee as part of your gross income so you have to back it out). Other expenses you can deduct are fees for hiring a cleaning person or company, cleaning supplies, amenities provided to guests, furnitures, bedding, etc.
If you’re exclusively renting out a room then you can only deduct a percentage of your rent, utilities, insurance, etc. To determine the business percentage, you can measure the square footage of the room and divide it against the total square footage of your apartment or house.
To avoid an IRS audit, read up on our blog:
If you need more assistance, we provide tax consultation free of charge. You can drop us a note at www.getlevee.com/tax
Good luck!
Wow thank you so much for the response!
You’re welcome! If you have more questions, you can reach one of our CPAs at www.getlevee.com/tax. Cheers!
Quick question? Do most people file under rent & royalties or thy file under self employment category?
You need to determine if this schedule C or schedule E income. There’s some controversy over it. My CPA recommends E
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Cool. Thanks. Ive been reading a lot of people filing under schedule “C” self employment. I guess I can see how schedule “E” is more safer. Thanks again Kona.
KONA- Is there anything about AirBnb that is not complicated at all starting with booking, reviews, legalities and now taxation. LOL. Gotta love Air Bnb.
I’m not a CPA but I don’t think one option is safer than another. With self employment you have to pay social security tax and that is a consideration, but you also may also get many more deductions. I would consult with a professional.
So when I go to deduct a percentage of my utilities, do I set it up as a “home office” in my schedule C? I’ve done other home based businesses and have deducted my home office.
If you are referring to taking off expenses for a true dedicated home office then yes - home is 2000 SF home office is 300 SF = 15 percent of all expenses. Most people think you have to have a full room / space to claim the home office but that’s not true - if you have a 500 SF bedroom and put a desk and PC etc in the corner then that corner SF then becomes the percentage for your home office.
When a client pays his rent, utilities etc out of their business account I allocate those expenses to reflect the part for business under Home Office (with sub accounts set up in their books) then the rest of it goes to their owner draw account. (NOT their mortgage payments - those are all considered personal… rent yes… mortgage no) Some clients prefer to pay their utilities etc out of their personal bank accounts which I don’t track in their business accounting file then every quarter or even annually they provide me with the total dollars for each category and I allocate at that time the portion that is business related.
FYI I am not a CPA but I am an accounting firm owner and my clients books are kept by CPA standards.