Are any of my fellow Homeshare hosts itemizing the operating costs of their AirBnb? Please forgive my ignorance, but this is the first year I have have paid taxes for my AirBnb income and I’d like to give this info to my accountant, who isn’t familiar with AirBnb. Maybe “it isn’t worth it”, as I average $12k for my little room?
Thanks for ANY links, info or advice. As I said, I am utterly ignorant on this topic!
Of course, we deduct the expenses of our short-term rentals. To be clear these are not ‘itemized deductions’ that most U.S. taxpayers don’t take, opting for the standard deduction instead.
Your expenses against STR income are deductions either on Schedule E or Such C of a U.S. 1040 federal income tax return. I got the impression that @dpfromva is quite knowledgeable about taxes, though information here is at most guidance not personalized or tax advice, which you should seek only from a qualified representative. [This is not a perfunctory disclaimer. You really need to get advice only from someone who is both licensed and knows your whole situation.]
And, yes, it is worth it as every dollar of expense, whether ‘hard’ expense like toiletries, mortgage interest, property taxes, utilities or ‘soft’ expense like depreciation reduces your taxes by your marginal income tax rate. As a Homeshare Host you’ll need to be careful in allocating expenses to the business that are not personal.
Are you a U.S. taxpayer? In which state?
Your accountant might not know much about Airbnbs but should know about business and rental expenses. SO your accountant might know more about this than you think. Have you discussed this with your accountant?
Do you have commercial insurance? [Or somehow know that you can get a rider on your current insurance policy that will cover you for liability for these commercial rentals? That is, if a guest trips and falls (one of the most common claims) and sues you for $1,000,000, are you covered? Or accidentally starts a fire that destroys your home, are you covered? Or . . . ? The list goes on.]
He or she doesn’t need to be familiar with Airbnb. It’s a short term rental business - a business that has been going on for thousands of years.
Your situation depends where you’re located to a great extent. The best thing to do is talk to your accountant.
My accountant takes care of figuring out what portion of my house, utilities, etc that my STR uses. I itemize cost of linen replacement, food, and other additions to the space. Before COVID I was making $12-15,000 and it was worth it in my state in the US. A few dollars can change a tax bracket.
I don’t quite understand your question. What “isn’t worth it”? Of course you should keep track of your expenses and have a talk with your accountant who can figure out how much money you are really making after expenses and taxes. Then it’s up to you to figure out if it’s worth hosting. Unless you’re actually losing money, or making $3/hr. for your own labor time, I’m not sure how it would be more financially advantageous to have an empty room sitting there than to rent it out.
Once you get some numbers from your accountant, you can figure out if you perhaps need to raise your prices a bit. I also have had to start paying taxes this year, and I will be raising my nightly price by a few bucks to offset that. I won’t be hosting again until Oct, so I haven’t done it yet, but I definitely will.
Don’t forget about expenses for things that are part of your normal bills, whether you were hosting or not, like the utilities, property taxes, etc. A percentage of those can usually be used as deductions for a home-based business.
Thank you all for the valuable information. My accountant is familiar with rentals in general, but the info his worksheet asked for just isn’t appropriate - it’s for apartment rental, etc. The P&L for AirBnb rental that a member of another forum volunteered to the Community a year or so back, jibed with the advice of a friend/host I spoke with this evening, whose accountant is familiar with AirBnb.
Whew, so happy to be almost “out of the woods”.
Thanks again for volunteering great info, and so kindly!
If the accountant doesn’t ask you how long your average stay is, then you should consult a different accountant. That should be the accountant’s first question because nothing can go forward correctly without that information.
Of course we write off expenses. Save all of your receipts. If your accountant isn’t familiar with ABB, find somebody who is or just pay more in taxes.
Our first 6 months our expenses slightly exceeded our income owing to repairs.