February was the month of LOVE! I hope it has carried over to this month. If we’re lucky, really lucky, it will continue until at least April 18. We ALL know that date. No, it’s not a B-day (at least, no one I know). It’s not an anniversary (not a good one). It’s not a holiday either, though if you joined my February Webinar it could be.
April 18 is the deadline for TAXES, and my February webinar was ALL about TAXES! This webi was geared to giving you all the pertinent Airbnb tax information to ensure your refund is as hefty a “gift” as possible. I did say, “holiday!”
Oh dear, did you forget to join my February Tax webinar? Well, as always you're in luck it’s on “Replay” below!
The ¨Airbnb, Taxes and YOU¨ Podcast is right below for your listening pleasure.
Please remember to tune in every week to The Hosting Journey Podcast. A Podcast for Hosters! Where no hosting subject is taboo, and if it is, it won´t be!
I’m much more forgiving than our IRS.
To help us through this Tax maze, I brought in our resident sharing economy tax expert, Derek Davis, Certified Public Accountant from Shared Economy. Derek has been my guest for my tax webinars for the last two years, and he returned this year for a third round! We spoke about 1099, business deduction, and even the old good Schedules C and E.
We all know Tax season can be overwhelming and stressful, but I’m confident this webinar on Airbnb and your taxes will ease your mind and help YOU get through it, . perhaps even enjoy it. Cue up the ”holiday music!”
I do hope you check out the Recap for the FUN TAX FACTS!
Because this is a hot topic, here is the disclaimer:
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Furthermore, this information is not meant to be personalized legal, tax, investment, or any business advice in general.
In other words, talk to your accountant or book Derek for a consultation before you go ahead and Turbo your taxes
- Airbnb = Not everyone gets a 1099.
- Reduced Standard Mileage for 2016 to 54 cents per mile.
- Insurance = Penalties this year, and will increase next year (this has to do with health insurance penalties).
We defined a 1099:
- 1099 is a US tax form reported to hosts and to the IRS.
- It reflects how much income you have generated.
- It is for independent contractors, consultants, and investors, including Airbnb hosts.
You will only get a 1099 from Airbnb if you are a Host who earned over $20,000 AND had 200 transactions.
So, if you’re waiting for the mail for your 1099, you will not get it unless you met BOTH requirements. Otherwise, no 1099 for you.
So, if you’re waiting by the mail for your 1099, you will not get it unless you met BOTH requirements. Otherwise, no 1099 for you.
This doesn’t mean you don’t need to report the income. Say what?!
Yes, even if you don’t receive a 1099, you still need to report your Airbnb income in your taxes.
There is no statute of limitation on income evasion, which means the government can come back to you at any time for not reporting your income. There have been plenty of celebrities caught for tax evasion.
You can find your Earning Summary Report Here:
Why This Change?
By implementing a 1099 threshold, Airbnb wants to classify itself as a 1099K, which is a Payment Processor. This means they are not hiring anyone directly in their platform; they only facilitate transactions between guests and hosts.
Remember, whether or not you received a 1099, Airbnb’s 3% fee is included as part of the income you received.
The amount that should be reported for tax purposes is the gross amount, including the 3% Airbnb commission. However, hosts can also list that 3% commission as part of their expenses.
Schedule C and E:
Derek and I also had a long conversation about Schedule C and E:
- Schedule C means Active; Schedule E means Passive.
- To determine whether you use Schedule C or E, hosts can take the IRS Material Participation Test, which is a 7-point test:
- Taxpayer (i.e., you) worked 500 or more hours during the year in the activity.
- Taxpayer does substantially all the work on the activity.
- Taxpayer works more than 100 hours during the year, and no one else works more than the taxpayer.
- Significant Participation Activity.
- Taxpayer materially participated in the activity in any 5 of the prior 10 years
- Activity is a personal service activity.
- Taxpayer participates in activity on a regular, continuous, and substantial basis.
Derek pointed out that more often than not his firm assigns hosts to Schedule C because this is the more conservative choice. In this Schedule, the host is paying self-employment tax.
He also mentioned that a lot of hosts who classified themselves in Schedule E last year received letters from the IRS.
The next topic was Business Expenses:
Business expenses are the cost of carrying a trade or business that is usually deductible if the business is operated to make a profit. These expenses must be ordinary and necessary to be deductible:
- ‘Ordinary’ means that they are common and accepted in the Airbnb hosting industry.
- ‘Necessary’ means that they are helpful and appropriate for the business.
- Examples of valid business expenses are food and beverages for guests, gas, car maintenance, and utilities.
I feel I need to reiterate this point:
Even if you didn’t get a 1099 from Airbnb, you still HAVE to report your income.
I highly suggest checking out the webinar to hear the many different questions the hosts asked. These questions included provide a 1099 to your cleaner and/or handyperson if you've paid them over $600 in a year. So yes, go to the webi. You’ll get ALL this info and more. Plus, you'll see the fun you missed.
I do recommend that you contact an accountant, CPA, or Derek. You can always deduct their fee on next year’s taxes.
Until next year,
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You can read additional Airbnb Articles and Reports Here:
How taxes work
US federal tax
How do taxes work for hosts?
US Federal Tax
Value added tax
What expenses are deductible from my Airbnb income?
Where do I find my Airbnb earnings for tax purposes?
What expenses are deductible from My Airbnb Income?
Airbnb Ernst & Young General guidance on the taxation of rental income.