So, I just finished researching the taxes I’m supposed to pay. The self-employed/income taxes are easy as I’ve done that before as a landlord. My question is these local tourism taxes: Is it based on my rates, what I actually make after AirBNB fees, or after my expenses like amenities and utilities? I just want to have a guess on what I’ll actually be paying, because 7.25% can add up if it’s on everything!
Hi Sarah, the transient occupancy tax a.k.a. tourist tax or hotel/motel room tax is based on your listing price plus any fees for other items, like cleanings or extra guests. In many locality, the refundable portion of the cleaning fee is not taxable.
Unlike self-employment and income tax, the occupancy tax is not based on income after expenses. It’s similar to sales tax where we pay tax on the gross amount.
Hope that helped clarify things.
Yes, that helps a lot. So do I calculate that on what is then transferred into my account, or based on my actual fees before Air takes their percentage?
Great question! I’m glad your asked. The tax is based on gross amount which means before Air takes their fees. Here’s why:
Your local government is taxing your guest (not you) for visiting your city. You are just required to collect (remit) the tax on the gross amount paid by your guest. The guest nor the city don’t care about your expenses and fees to facilitate this exchange.
The big question is: Is it fair for Airbnb to collect a 3% fee on the occupancy tax you’re collecting on the government’s behalf? I think it’s a fair service fee but only if Air is doing the collection and filing of the necessary periodic tax filing forms.
Bonus info on MO’s tax:
The 3.5% tax is used to make County tourism infrastructure payments, primarily the domed stadium at America’s Center, Busch Stadium and the Creve Coeur Park Soccer Complex.
The 3.75% tax is sent to the Convention and Visitors Commission (CVC) to use for advertising to attract people and conventions to St. Louis.
Good to know. So I guess it will take just a bit more calculation than just adding up what went into my bank account and doing the %s. Ugh. Glad I recently upped my fees a bit. I did add verbiage that my rates include local taxes. I guess I should raise a bit more just to make sure I actually make money on all this. At least taxes are an income-tax deduction…
Glad to help. If you go to the transaction history, you can see your gross earnings, Air fees, and cleaning fees. Download it to excel so you can filter by quarters. Sum the amount for the quarter x tax rate and remit the payment by the 20th of the month after the quarter ends.
Not all taxes are created equal and tax deductible:
Occupancy tax is not tax deductible but it should also not be included in your 1099 income.
Federal income tax is not tax deductible.
Only half of Self-employment tax is tax deductible.
Property tax is only deductible when you itemize or only the portion you’re claiming for business.
State sales tax or income tax is deductible if you itemize.
Sales tax paid for your business is tax deductible as part of the cost of the business purchase.
Just go to the transaction history and you can see the gross and net.
Levee, glad to see you guys back!
I collect Hawaii excise of 4.167 and TAT of 9.25 in cash from the guests on the payout amount. I file semi annually with the excise office, who also takes the TAT payments.
Alvara does the reporting for me and it gives me peace of mind. I began making sure that I was as up to speed with compliance and taxes for sure from day one.
Since Airbnb is a grey area anything that I can do to at least appeal to the local government and state entities help me out when I go before commissioners and bring my records. (no they don’t get to keep them, just view them)
We collect the taxes seperately from the guest. If you roll it into your rate, you will then pay THEIR taxes on top of their taxes.
If your room rate is $100 and the rate is 10%, you will up your room rate to $110. however, now your taxes are 10% on top of the $110.
We make it clear in the listing - and for us, it’s the sales AND occupancy taxes we have to charge. We collect it in cash when they arrive.
btw, if this is your home, you do not have to pay self-employment tax.
It’s pretty eye-opening when you sit down and do all of the math on this. 6% to the state. 7% to the county. A varying percentage for the license. Up to 35% to the feds (before deductions). Almost half of the nightly ends up going to some bureaucracy before you even get around to buying the soap and snacks. Never mind if you actually properly employ a taxable cleaner.
Yup, that is called pyramiding.
This may not be true! She should consult her tax professional!
There’s a lot written about this. Here are two examples:
http://www.nytimes.com/2015/06/17/your-money/lodging-taxes-and-airbnb-hosts-who-pays-and-how.html?_r=0 (various US states) and
The taxes can be quite substantial, and retroactive assessment and collection very painful. A Web search gives you the sense of what is going on, and the political forces behind the tax enforcement. Airbnb’s involvement, with a view to protecting their own interests, among them. https://duckduckgo.com/?q=airbnb+local+tax&t=hd&ia=web
You are right!! I was surprised, as you were, to find out that my tax filing was handled the way it was - but happy we don’t have to pay the SECA tax!!
I pay self employment tax, but for another business. But the rental was strictly taken as a home deduction rental. Which is OK I guess.