How to File Airbnb 1099 Taxes
It doesn’t matter if you do home sharing, have a vacation rental business or are giving people local experiences, you want to discover how to file your Airbnb 1099 taxes. Airbnb, HomeAway or VRBO are fantastic ways to make some extra cash or a full time income. But with more income comes more responsibility. Between managing check ins, guest issues, and CDC approved cleaning, calculating your 1099 taxes may feel like the last thing on your mind. This article will give you confidence that reporting your Airbnb 1099 income is not scary after all.
Occasional Hosts Tax Tip: 14 Day Rule
Many people avoid renting out rooms in their home because they don’t want to report their rental income wrong to the Internal Revenue Service. This is understandable but there is a 14 day exception rule that many don’t know about.
You don’t have to report your income if you:
- Rent your property for 14 days a year or more and
- Use the house/apartment yourself for 14 days or 10% of the total days you rent to others.
There is a small catch, of course. If you don’t report your income then you can’t write off any associated expenses, but you usually can still use mortgage interest and property tax deductions to lower your tax payment. More on writing off business expenses later.
This may sound too good to be true, but it’s not. If you are skeptical, read more information from the IRS on renting residential and vacation property. You have to keep a detailed record of your rental days, personal residence and business expenses in case you get audited.
Reporting Airbnb Taxes
As a classified independent contractor you will usually have to report your own federal and state income taxes. The IRS considers Airbnb hosts as non-employees so they have to file FICA self employment taxes both as a business and as an employee. FICA taxes are Medicare and Social Security taxes.
This differs from being an employee of a company because they will withhold the employer portion of FICA taxes for you. Each portion is 7.65%, totaling 15.3% of your gross Airbnb income at the time of writing this article. The good news is half of your owed FICA tax could be a write off to lower your tax bill.
As well as income tax you may owe sales tax depending on the state of your property and reservations.
Before you file your tax return make sure that Airbnb is not already withholding taxes for you.
Does Airbnb Report My Earnings?
Depending on the information you submit when making an Airbnb account, they could be withholding income taxes for you already. Do not assume they will though. If you didn’t provide them with a Form W-9 information, then they are required to withhold 24-28% from your payouts and submit them to the IRS. Find out if they are withholding taxes already before filing anything by contacting them directly.
Airbnb 1099-NEC vs 1099-K Forms
As an independent contractor for Airbnb, you have to file a 1099 tax form for your gross earnings to the IRS. The form varies depending on your state but applies to both rental hosts and service providers such as photographers, translators, or retreat hosts.
If your Airbnb rental business makes more than $20,000 in sales and has 200 or more reservations during a calendar year, then Airbnb is required to send you a Form 1099-K.
If you made $600 or more from Airbnb’s service providers section, then you will have to report your income on a Form 1099-NEC. Previously known as the 1099-MISC. This is most common for people using the "experiences" section on Airbnb such as tour guides, translators, photographers or local experts.
If you are from Massachusetts or Vermont, then you will have to file a 1099-K if you made more than $600 a year instead of the 1099-NEC on your tax return.
The forms will be issued typically in late January to you by traditional or email.
Income and sales tax is the majority but not all of what you might owe the internal revenue service.
Use our 1099 calculator to see how much tax do you pay on 1099 income.
Occupancy, Hotel, Transient & Tourist Impact Taxes
Along with FICA and federal taxes, make sure to check with your state, city and county to see if they want occupancy taxes on short-term rentals. These taxes can apply to not only vacation rental businesses, but also people renting out a room in their personal home.
A survey done by the National Conference of State Legislatures discovered that roughly 20 states have occupancy taxes. The name and terms of this local tax can vary, but the tax usually applies for stays shorter than 30 days in most states. They are most commonly called hotel, transient room, or lodging taxes.
Depending on the location, Airbnb may collect some of these taxes for you from your customers and then send them to the right government authority. However, do not make the mistake of assuming they will. You may have to collect the taxes from your customers and turn them in to your local authority. Learn more about Airbnb’s policies on occupancy tax collection. To off set all these taxes you must discover how to write off all the business expenses you can.
Common Tax Deductions & Write Offs
As a self employed business owner, you need to keep track of your expenses so you can write them off. Writing off your expenses is essential to keeping as much of your hard earned cash as possible.
Most common Airbnb tax deductions:
- Cleaning services and supplies
- Property depreciation
- Bed and breakfast supplies such as food, coffee, disposable bathroom supplies
- Property insurance and private mortgage insurance (PMI)
- Service fees by Airbnb
- Mortgage loan interest
- Property Utilities such as water, gas, electricity, wifi, or cable TV.
- Rental property and furniture repairs
- Advertising costs
It's easy to know when to deduct business expenses that are only for your business, such as cleaning and service fees. However, when your personal and business expenses are mixed, how much you can deduct becomes unclear.
Make Your Expense Tracking Easier
When you live the property you rent out full or part time your personal and business expenses are mixed. Your tax deductible portion for mortgage payments, PMI or utilities become complicated when you live in the property you rent out.
If you live in your house full time and rent out a room, then you take the square footage of the rooms you rent out and divide it by the whole house. This percentage is the amount you can write off from these expenses.
If you rent out your whole house part of the tax year and live in it the other portion, you must keep track of the days you live there. You can usually only write off the percentage of time you don't live in the property.
Knowing how much to deduct can be a challenge without the proper bookkeeping and expense tracking system.
The best solution is to use an automated business expense tracking software to do the calculations for you. Keeper tax is a simple and easy way to outsource this complicated aspect of your business to a tax professional. They assign every subscriber a personal certified bookkeeper to keep tabs on their expenses, offer tax advice and make sure they get the most deductions.
Once you have a detailed record of your tax deductible expenses, then you must report them on a Schedule C Profit or Loss Form from the IRS website.
When Are Airbnb 1099 Taxes Due?
Just because you don’t receive a form does not mean that you are off the hook with the IRS. If a taxpayer is making more than $600 a year in rental income, then the IRS wants you to make quarterly estimated tax payments.
- Quarter 1 - April 15th
- Quarter 2 - July 15th
- Quarter 3 - September 15th
- Quarter 4 - January 15th
If you underpay, then the IRS can charge you interest on top of the taxes you already owe. When you overpay, then you are basically giving the IRS and interest free loan instead of investing in your business. You need to estimate your payments accurately so you can save money effectively.
The easiest way to estimate your owed taxes is to use a high quality online quarterly tax calculator.
Overall, filing your taxes as an Airbnb host should not be intimidating. When you have the right knowledge, automated expense tracking and professional help, the amount you owe the IRS will shrink down to the bare minimum.