As Airbnb’s popularity continues to rise, more and more people are renting out their homes and learning about the tax implications that come with it. When you offer your home, or a room in your home, as a short-term rental, you may be able to keep your income taxes to a minimum and sometimes eliminate them entirely if you follow some of these useful tax tips.
Learn About the 14-Day Rule
The 14-day rule is very important for anyone considering renting out a personal residence. Under this rule, you don’t pay tax on income you earn from the short-term rental as long as you rent the property for no more than 14 days during the year AND use the home yourself 14 days or more during the year or at least 10% of the total days you rent it to others.
Keep Records of Rental Periods
If you rent out your place for two weeks or less, keep track of both rental days and those days you used the residence yourself. If you rent for longer than the 14-day exception period, detail the dates precisely so you can separate what expenses are considered personal and what expenses are business. Keeping good records will help document your rental activity as a short-term vacation rental.
Don’t Panic if You Have to Prove You Have a Short Term Rental
The rule is simple: you don’t have to report rental income if you stay within the 14-day rule. However, because of reporting laws, companies like Airbnb, HomeAway, and VRBO may report to the IRS all income you receive from short-term rentals, even if you rent for less than two weeks. If this happens and you don’t include the income on your tax return, the IRS may ask you for information regarding your short-term rental. Don’t panic: your records that reflect details of your rental activity will show that your rental was a short-term rental.
Don’t worry about knowing these tax laws. Meet with a TurboTax Full Service Expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.
Selling Your Home? 4 Must Know Tax Tips