Tax Guide for Short-Term Rentals

Airbnb, HomeAway, VRBO and More

Tax Guide for Short-Term Rentals

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Tax Guide for Short-Term Rentals

New Title

, 1st Edition

The complete tax guide for Airbnb and other short-term rental hosts

This book focuses on the unique tax issues arising from renting residential or vacation property through online rental platforms like Airbnb, FlipKey, TripAdvisor, Craigslist, and VRBO. Every short-term rental host needs to understand these tax rules to ensure they take all the deductions to which they are entitled, pay no more tax than is legally required, and stay out of trouble with the IRS. This book provides all of this information in a practical, easy-to-understand way.

All the information in this book is up-to-date for the 2017 tax year.  There is an update page on the Nolo website specific to this book which explains how the new tax law (passed in December 2017) will affect short-term rental hosts' taxes for 2018 and future years.

See below for a full product description.

Product Details

As a short-term rental host, you’re entitled to many valuable deductions and other tax benefits. This book—the first of its kind—shows you how to pay no more tax than necessary on your rental income while complying with IRS rules.

Learn everything you need to know about taxes, including:

  • what deductions you should be taking
  • how to report your short-term rental income
  • how to deduct losses
  • vacation home and tax-free rental rules
  • how to allocate costs when you rent a room in your home, and
  • how to keep proper records.

Whether you rent your property through Airbnb, FlipKey, HomeAway, TripAdvisor, Craigslist, or VRBO, you want to make sure you understand these tax rules. That way, you can rest assured you are making the most out of your hosting business without risking problems with the IRS.

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Table of Contents

1. Who This Book Is For

2. How Short-Term Rental Hosts Are Taxed

  • Income Taxes
  • Social Security and Medicare Taxes
  • Net Investment Income Tax
  • Local and State Occupancy Taxes

3. Tax-Free Short-Term Rentals

  • Short-Term Rentals That Qualify for Tax-Free Treatment
  • Effect of Qualifying for Tax-Free Treatment

4. Deducting Your Expenses: The Basics

  • What You Can Deduct
  • How Your Tax Status Affects Your Deductions
  • Deductions for Multiple Owners

5. Operating Expenses

  • What Are Operating Expenses?
  • Direct Expenses Deductible in Full
  • Operating Expenses That Must Be Allocated

6. Repairs

  • Repairs vs. Improvements
  • Deducting Repairs for Short-Term Room Rentals
  • Three Safe Harbors
  • Repair Versus Improvement: Analysis Under the Regulations
  • How to Deduct Repairs and Maintenance
  • When Guests Pay for Repairs
  • Properly Document Repairs

7. Deducting Long-Term Assets

  • Depreciating Property Used in Your Rental Activity
  • How to Depreciate Real Property
  • Personal Property
  • Section 179 Expensing
  • Regular and Bonus Depreciation
  • Personal Property Converted to Rental Use

8. Prorating Your Deductions

  • Direct Expenses Are Fully Deductible
  • Expenses That Must Be Prorated
  • Calculating Personal and Rental Days

9. Reporting Rental Income on Your Tax Return

  • Most Hosts Use Schedule E to Report Rental Income
  • Schedule E Line-by-Line
  • Completing Schedule E When You Have a Rental Loss
  • Hosts Who Don't File Schedule E

10. Filing IRS Form 1099 Information Returns

  • When Someone Else Reports Your Rental Income to the IRS
  • Reporting Payments You Make to ICs and Other Workers
  • Back-Up Withholding for Independent Contractors

11. Deducting Losses for Short-Term Rentals

  • What Are Rental Losses?
  • Which Rental Loss Rules Apply
  • Vacation Home Rules
  • Hotel Business Rules
  • Regular Rental Activity Rules

12. Record Keeping

  • What Records Do You Need?
  • Trackiung Income and Expenses
  • Supporting Documents for Your Expenses
  • Property Usage Record

Sample Chapter

Introduction: Who This Book Is For

This book—the first of its kind—is a guide to the income tax issues faced by people who rent out all or part of their homes to short-term guests. We refer to such people as short-term rental hosts. The information here applies to rentals arranged through online rental platforms such as Airbnb, HomeAway, VRBO, FlipKey, and others. It also applies to short-term rentals made through Craigslist, or made offline through local advertising, word-of-mouth, or any other means.

This book provides the tax knowledge rental hosts need whether they rent out all or part of their main home, vacation home, or any other property they own or rent, like a cottage or separate unit attached to their home. The tax rules for short-term rental hosts are different from those that apply to traditional landlords. If you’re a traditional landlord who rents property full time to long-term tenants (or if a short-term guest ends up being a long-term tenant), refer to Every Landlord’s Tax Deduction Guide, by Stephen Fishman (Nolo), for in-depth guidance on all the tax issues you face.

Taxes are complicated enough for traditional landlords, but they can be even more difficult for short-term rental hosts. Online rental platforms provide little or no tax guidance—they’re in the rental business, not the tax advice business. Many tax professionals have little understanding of the unique tax problems posed by short-term rentals. This book is intended to fill that void.

Although short-term rentals can be highly lucrative, most hosts are not getting rich. One recent survey of Airbnb hosts in five large cities found that the average host rents his or her main home or vacation home for 66 days with the typical host earning approximately $7,500 in extra income per year on a single property.

Minimizing the taxes you pay on your rental income can make your hosting activity far more profitable—indeed, it can spell the difference between making and losing money. Residential real estate rentals provide a wide array of tax breaks—more than almost any other income-generating activity. These tax benefits are as available to short-term rental hosts as they are to owners of large apartment buildings. In fact, unlike traditional landlords, some short-term hosts can rent their property tax free!

This book provides all the information short-term rental hosts need to minimize their taxes and stay out of trouble with the IRS, including:

when short-term rentals are tax free

how to identify, allocate, and maximize short-term rental deductions

IRS reporting for short-term rentals

how to deduct short-term rental losses

completing your tax return (IRS Schedule E), and

record keeping for short-term rentals.

Even if you work with an accountant or other tax professional, you need to understand these tax issues. Doing so will help you provide your tax professional with better records, ask better questions, obtain better advice, and, just as importantly, evaluate the advice you get from tax professionals, websites, and other sources. If you do your taxes yourself, your need for knowledge is even greater. Not even the most sophisticated tax preparation software provides the insights and specialized guidance you’ll find in this book.

The time to start planning to reduce the taxes you’ll need to pay on your short-term rental income is now. You can’t wait until April 15—by then it will be too late to implement most of the tax savings strategies and procedures covered in this book.