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I’m trying to get ready at put my place live and want to be sure I don’t get any surprises.
With regards to federal taxes. I’m reading it is advantageous to record your income and expenses on IRS schedule E (passive income) vs schedule C (active income). This allows you to avoid paying the 15+% social security taxes.
I’m curious though what are people doing to avoid schedule C and the social security taxes.
Consult a tax professional. There are pros and cons to each.
We do schedule E per our professional tax accountant.
Yes, if you you have net income it’s advantageous to record your income and expenses on Schedule E to avoid SE tax but if you have a net loss, it’s considered passive loss so you can only offset it with your passive income.
The more important question: is your income truly passive like a rental company or is it active like a business? Most likely it’s the latter for hosts, therefore, you record on Schedule C. There are two ways to avoid social security taxes:
1.) Rent your property for long term and don’t provide any services
We wrote about it here: 5 Simple Concepts for Airbnb Hosts to Avoid IRS Tax Audits.
2.) Form an S-corp entity and pay yourself a reasonable salary, the rest are return on investments.
If you have any additional questions you can ask us anything at hello@getlevee.com
This is one of the most bizarre websites I have ever seen. There is no indication of WHO owns the site or what their qualifications might or might not be. There is no About page. There is no list of experts with their degrees and certifications. It is, on the face of it, a poorly coded website with no credentials. Why should we listen to you over Ernst & Young or HR Block who have also published AirBNB tax guides?
Hi Susan,
Thank you for your feedback on our blog site. If you’d like to learn more about us, please visit us at www.getlevee.com/about
You can search our team and credentials on LinkedIn but here are a few reasons why you should listen to us over EY or HRB:
1.) EY is the one of the Big 4 Accounting firms in the world – so they are the gold standard. We worked at one of the Big 4 for 5+ years advising on billion dollar companies how to comply and save on taxes. But unlike the partners at EY, a large chunk of our client base are Airbnb hosts and we’ve been hosts and guests so we really know what we’re talking about.
2.) HRB care more about money and generating fees than reputation. I suspect that the goal of their guide is to get you to visit one of their offices. If you’re lucky enough you will get someone who is knowledgeable and not a part-timer data entry person.
3.) Then there are unqualified tax preparers who will write about anything to get you excited. Either they’re wrong or they’re taking an aggressive position that could get you audited.
If you email us, we can let you know when our website is updated and optimized.
Best,
Levee Team