You've decided to rent out your property on Airbnb as a part-time or full-time business. and are overjoyed with the benefits it brings. However, let's be honest, you are probably not excited about paying taxes on your hard-earned Airbnb revenue. Airbnb and other similar sites usually report to the IRS, so if you rent out your property for more than 14 days, you'll have to pay income taxes. Tax deductions, on the other hand, help to alleviate some of that burden by lowering your tax liability. Your taxable Airbnb income will consist of your earnings less any deductions. So, in order to keep as much of your money as possible, keep meticulous records of all your Airbnb income and expenses. When you have an efficient process in place, this is simple.
It's critical to keep track of your expenses and income as an Airbnb host. Keeping a meticulous record of this information is critical to the smooth operation of your business.
Any minor expense related to your Airbnb property — linens, batteries, cleaning supplies, and so on — should be included in your financial records to help you maximize tax savings. When tax season arrives, you or your accountant can use this information to ensure that your taxes are filed correctly and even help you get a larger return.
Continue reading to learn how to efficiently record and track your Airbnb income and expenses, as well as examples of tax-deductible Airbnb expenses and the best Airbnb expense tracking apps to download.
A vacation rental owner's struggle with Airbnb bookkeeping is fairly common, but there are ways to alleviate some of the stress.
We've provided 5 tips to help you efficiently track your Airbnb expenses and income, whether you've just started your Airbnb business or are an experienced host looking for better ways to manage multiple rental properties.
Having two or more bank accounts may appear to be extra work, but it is not. You will know exactly which vacation rental expenses go with your Airbnb business if you open a separate bank account for it.
Keeping your personal and Airbnb income and expenses in one place may help you save a few dollars each month. However, it will make tracking much more difficult when tax season arrives. Having a separate bank account for your Airbnb business may also allow you to deduct a portion of the monthly bank fee as a tax reduction.
Choose a reputable card processor like Stripe to keep track of your Airbnb payments from direct booking sites and upsell services.
Not only will this ensure that guests can send you payment easily and quickly, but you will also be able to manage revenue and receipts while avoiding potential issues such as lost records and payment errors.
Collecting income data will be much easier and faster if you centralize income transactions in a scalable, secure, and reliable credit card processor.
Hiring a Certified Public Accountant (CPA) can provide you with valuable guidance on what vacation rental hosts should keep track of.
Because accountants are familiar with local tax laws, they can assist you in identifying tax-deductible Airbnb expenses that many vacation rental hosts overlook. These include office equipment, property taxes, HVAC upgrades, and other items
Working with an accountant and obtaining professional assistance will provide you with the peace of mind that your taxes are being filed correctly and on time.
You'll be surprised at how much you can legally deduct from your business by meeting with your CPA.
It is critical that you save receipts in order to reduce your taxable Airbnb income.
Receipts will demonstrate that your vacation rental expenses were for business purposes and not for personal enjoyment. Providing receipts is a method of validating your deductions with the IRS (Internal Revenue Service). Reduced tax liability can have a significant impact on the amount of profit generated by your Airbnb business.
Find a list of tax-deductible Airbnb expenses to write off in the following section so you know which receipts to save.
Keeping track of receipts and bank statements manually is quickly becoming outdated for busy Airbnb hosts.
Assume you have listings listed on multiple sites like Vrbo, Booking.com, and Airbnb. You'd have to log into each site to see your specific payments and expenses for each property. Furthermore, keeping all of your receipts and invoices organized can be extremely difficult, especially if you have multiple properties.
Consider automating your Airbnb expenses and income to keep accurate records, stay organized, and save time. Continue reading to learn about our top Airbnb expense-tracking apps for optimizing your business.
There are numerous Airbnb expenses that are tax deductible. What difference does it make? You can use those tax breaks to offset your Airbnb earnings. On the plus side, you're probably already paying for those expenses. As a result, claiming expenses is a simple way to recoup taxes owed. All you need to do is keep track of what you can claim and keep records for future reference.
To get a 5-star review, it's essential to run a clean vacation rental. Fortunately, all cleaning products are expenses that can be deducted when filing taxes. But did you know that cleaning services such as laundry fees and turnover services can be deducted as well? So all the more reason to hire a cleaning service to do the dirty work.
You can set your Airbnb pricing or charge a cleaning fee to cover the cost of cleaning services. Furthermore, owners and hosts who use cleaning management software and apps to coordinate services can deduct the subscription fees. However, charging a security deposit makes things a little more complicated. In this case, if you choose to deduct the cost of the repairs, the retained security deposit is taxable income.
You can claim any repairs you had to make to your property if you for example hire a professional to fix a door or a window. The same is true for repairing an expensive HVAC system! If you're a DIYer, any supplies you buy at the hardware store can be deducted.
You must have vacation rental insurance if you rent your home to strangers. You put in a lot of effort to get that investment property into operation. So why take the chance? Unfortunately, Airbnb insurance isn't always enough to protect your business completely. To begin with, the payout time is extremely long. Secondly, insurance will not cover lost income if your vacation rental is unavailable for repairs (i.e. if a renter causes a fire). Though insurance can be costly, claiming it as a tax deduction negates some of the cost at the end of the year. Just make sure to save your bills so that you can deduct them.
Utilities such as water, electricity, and internet are simple deductions, especially since most guests nowadays look for free Wi-Fi. Don't forget that if you offer subscriptions to services like Netflix, Hulu, and Amazon Prime TV in your vacation rental, you can also claim them. If you use your personal account at home and at the vacation rental, don't be greedy and deduct the entire subscription fee; instead, deduct 50%. However, check with an accountant to see if you can make a split claim because tax laws vary by state.
To run a successful Airbnb business, you will need cleaning supplies, snacks, furniture, fixtures, bedding, and other accessories. The good news is that you can also deduct these expenses. So, greet your guests with a bottle of bubbly and some finger foods. Yes, you can deduct those costs from your tax. A good vacation rental welcome pack also serves as an excellent way to earn a 5-star review.
Marketing is essential for any business. When you pay for marketing, you will also increase your income by attracting more visitors. Furthermore, because any marketing costs are tax deductible, you can pay less tax. This is unquestionably a win-win situation.
This is yet another win-win situation. When you hire an accountant, they will make certain that you deduct all of your expenses. This includes the accountant's fee as well. The same is true for other services such as lawyers, photographers, website development, and online marketing. Tax deductions can even be claimed for expenses such as paid advertisements on your direct booking website. So, seek assistance from the best and enjoy those deductions!
If you use vacation rental software such as Hostaway, cleaning management apps, home automation apps, or dynamic pricing tools, you can deduct any of the subscription fees as expenses. When you consider the income-boosting or time-saving benefits that such software provides, it becomes a much more appealing proposition.
Hostaway charges a monthly or annual subscription fee for the use of the Hostaway platform. When it comes time to file your annual taxes, you can deduct this fee as a business expense. To learn more about reporting rental expenses, see IRS Publication 527, Residential Rental Property.
Are you feeling a little overwhelmed? We all know that taxes can elicit a wide range of emotions. If you're feeling overwhelmed by the need to track all of this information, we recommend starting with one of these excellent expense-tracking apps.
Even if you're new to the vacation rental game, you've probably heard of Quickbooks because it's widely regarded as the best accounting software for small businesses. You'll also appreciate the mileage tracking, batch invoice creation, and business analytics.
Stessa is a free online tool for tracking your vacation rental expenses. Users love that Stressa is simple to use and can track everything from your income to your spending. This app provides everything you'll need to prepare for tax season.
Staying organized and on top of your rental property income and expense tracking responsibilities can be difficult. Following the tips above can help you save time, energy, and money, making Airbnb worthwhile all year, even during tax season.