How Do I Take Airbnb Tax Deductions as a Host?
Schedule E Tax Deductions for Airbnb Hosts
Are you a host for Airbnb, VRBO, or another home-sharing service? You will need to know what expenses are deductible to you as a host, so you can record those expenses to save on taxes.
How Airbnb Hosts Take Deductions
Most Airbnb hosts pay taxes as landlords. Being a landlord is—for tax purposes—different from being “in business.” All you do is provide the space and collect rent payments. You don’t do anything else for the renters by providing services.
The IRS considers this rental or landlord activity as passive activity, with specific rules about losses, and what types of tax deductions you can take. This income or loss is added to other income or losses to determine the owner’s total tax bill.
You can only take tax deductions for passive activity up to the amount of your income from that activity. You can’t take a passive activity loss that’s greater than your income.
For example, if you have landlord income of $5,000 in a year and you have expenses of $6,000, you can’t take the $1,000 loss off your tax return to offset other income.
Airbnb Hosting as a Business
If you are providing services to Airbnb clients, you are taxed and take deductions as a small business. Services, in this case, might include providing breakfast, dry cleaning, or laundry services.
In this article, we’ll look only at tax deductions for Airbnb hosts as landlords. You can find information on tax deductions for small businesses at Small Business Tax Deductions A to Z.
First, you should know that if you rent out your home for fewer than 15 days a year, the income is not counted and you don’t need to report any income you receive. You also can’t deduct any expenses in this situation. Your income and expenses from your Airbnb hosting as a landlord are reported to the IRS on Schedule E.
Some expenses may be limited based on the number of days you have renters and the amount of rental space in your home. On Schedule E, you will need to report the number of days you rented at a fair rental price for your home or part of your home. The IRS says a fair rental price is the amount of rent someone who is not related to you would be willing to pay.
If you are only renting part of your home space, you can only deduct the part of your expenses that applies to the rented space and only for the days you rented it at a fair rental price.
- Host expenses—These are expenses for your activity as an Airbnb host and may be deducted in full, subject to IRS limits. These are expenses that you would pay as a host, like advertising.
- Shared expenses—Some expenses can only be deducted for the rental space you have rented out and only for the number of days you rented it. These expenses must be divided between rental and personal use, as explained below.
If you are renting a room or part of your home, you’ll have to calculate the percentage of the entire floor space of your home that is the rental space. For example, if your home is 2000 square feet and the room you are renting is 120 square feet, the room is 6% of the total.
Here are two examples of how shared expenses are calculated:
Case #1 Sally rents her home 70 days during the year, she lives in the home for 295 days, and her indirect expenses are $1200. Total rental time is 19%, so she can take 19% of her indirect expenses, or $228, as rental expenses. As a calculation: 70 days is 19% of the total 365 days as a rental, so $1200 of indirect expenses times 19% equals $228.
Case #2 Sally rents a room in her home 70 days during the year. The room is 6% of her home space. She can only take indirect expenses for the 70 days and only for the amount of space used. As a calculation, that’s $1200 of indirect expenses times 19% (for days used as a rental), which comes to $228. Then, $228 times 6% of the home used means that $13.68 allowed for indirect expenses.
Deductible Expenses as an Airbnb Host
Here are the expenses you can deduct from your activity as an Airbnb host. You must have proof of expenses for deductions. Be sure to keep excellent records, including proof that these expenses were for your business, not for the personal use of your home. This is a brief overview of these expenses. Some of them may be limited or may not be applicable to your situation.
- Advertising: Advertising your home for rent is a host expense and advertising expenses can be deducted in full.
- Auto expenses and travel expenses: Any driving expenses should be divided between personal driving and driving for your home rental business purposes. You may also deduct business-related meal expenses at 50%.
- Cleaning and maintenance: Only the expenses related to cleaning the home or room for rental days are allowed. You will need to divide up bills using the percentage method above.
- Commissions: Paying commissions to others who help you find renters are allowed as a host expense.
- Insurance on your home: Your home insurance expense must be divided as a shared expense.
- Legal and other professional fees: If these expenses are completely for your home share service, you don’t need to divide them. They include any fees to the online service.
- Phone: You can’t deduct the cost of a landline in your home, even if renters have use of it.
- Interest expenses: If the interest is on a home loan, it must be divided using the shared expense method.
- Repairs: You can deduct the full cost of repair expenses directly related to your rental space but you must divide the cost of whole-house repairs using the shared percentage method.
- Supplies: If these expenses relate only to the rental space you can deduct them in full. Otherwise, you must divide them.
- Taxes: You can deduct the cost of some taxes if they are for your business only. You must divide property taxes on your home.
- Utilities: Utilities for your home must be divided.
- Depreciation: The depreciated value of the home must be divided.
Business tax deductions are complicated and every business is unique. Get help from a tax professional or use tax preparation software to prepare your Airbnb host tax return.