Every Airbnb Host’s Tax Guide Fourth Edition

Book Preface

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. It provides all of 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.

This year more than ever you’ll need guidance when it comes to taxes for your short-term rental activity. Congress passed the Tax Cuts and Jobs Act at the end of 2017, the most sweeping change to the tax code in over 30 years. Most of these changes went into effect starting in 2018. We explain how all the provisions of the new law affect hosts, including how you can use the new tax deduction for pass-through business owners to reduce the income taxes you pay on your rental income by up to 20% (see Chapter 8).

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.

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. 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.