Post by High Priestess on Feb 25, 2016 2:59:33 GMT
Posted by Wendy on Hosting 911 2 years ago:
www.airbnb.com/groups/content/content-47790
Wendy 2 years ago
TAX ISSUES --Relating to providing hotel-like services at our Airbnb's
Antoinette24 minutes agoThis actually has larger implications than might appear on the surface. I just filed my taxes for 2013, and I learned a lot about the nuances of Airbnb business from a tax perspective! For instance, did you know that the IRS could claim your Airbnb hosting counts as a business (instead of as a rental) and tax the income at the 25% business rate (so, Schedule C instead of Schedule E). For example...
"In some cases, renting out all or part of your house or apartment can be classified for tax purposes as the equivalent of running a bed or breakfast or hotel. This will be the case if you dedicate a room or rooms in your home solely for the use of paying customers and never personally live in such rooms. You’ll also be classified as running a hotel business if you provide substantial services that are primarily for your guest’s convenience, such as regular cleaning, changing linen, or maid service.
In this event, your rental activity will be treated as a business for tax purposes. This means you’ll have to pay both federal income and self-employment (Social Security and Medicare ) taxes on your rental income, which will increase your tax burden. On the other hand, the restrictions on your deductions described above won’t apply, except that there may still be limits on any annual losses you’re allowed to deduct. Ordinarily, you’ll report your rental income and expenses on Schedule C (Form 1040), Profit or Loss from Business.
Obviously, the way to avoid having your rental activity being classified as a bed and breakfast is not to provide substantial services to your guests—don’t provide them breakfasts, clean their rooms each day, or do their laundry. Charge renters a cleaning fee at the end of their visit that is separate from their daily rental charge."
See more of the article: www.nolo.com/legal-encyclopedia/tax-issues-when-renting-your-home-airbnb-vrbo.html
Disclaimer: I'm not a tax professional, just sharing what I've learned!
7 comments
Following
Like
Wendy
Wendy2 years ago
This was posted as part of a non-tax related issue in another thread --it is so important that I have re-posted here--originally submitted by ANTOINETTE---thank you!)
Reply Like
Susan
Susan2 years ago
I also use my bedroom for personal purposes when not rented out. Off the hook on this one!
Reply Like
Lula
Lula2 years ago
Susan, it is not as simple as it seems. It also depends on how many days of the year you have the room 'used' by yourself , the two-week rule per year, then it is treated like a vacation home. I've just finished my taxes, first time in 10 years I had a professional do it. I previously spoke also with 2 CPA's who audit the company I work annually. It is not even clear to them. The best solution I was told, for me to use Schedule E and do not mention the breakfast portion or maid service, or "congratulations, you run a hotel" and you have to file also Schedule C. I am very familiar with schedule C, as I ran ran an internet business for 11 years. For depreciation purposes (as a residence), we need Schedule E (if we own the house), for the service part (breakfast, cleaning, etc.) Schedule C is necessary to list the expenses.. Even I had to challenge some of the assumptions of my tax preparer. I will look into filing Schedule C (in addition to Schedule E) for next year, if my numbers become too big. I suggest people become educated and read. I caught 2 mistakes (or misinterpretations done by my tax preparer office), so I am filing an amendment next week. At least I am learning a lot in the process. Ask questions, from different sources.
Reply Like 2 replies•1 like
Susan
Susan2 years ago
exactly Wendy! there are operative words here "dedicated" "amenities" which are the major ones to go by, then there is the No. of days rented etc. The way around this is *wink* NOT dedicated, and NOT providing amenities far and beyond that routinely found in one's home. Frankly, it depends upon the duration of the stay (I purposely limit my stay duration and do not dedicate a bedroom and do not provide amenities that are not normally found in the normal course of a stay in a hotel). I am quite versed in the tax stuff actually so...well, each and every Host "should" discuss their situation with a tax professional at best anyway. This will be especially important as and when airbnb begins to collect transient taxes on lodging in our city. Hosts should consider setting their nightly prices based upon their tax situation, lodging taxes and deductions, not to mention their own income tax liabilities from wages earned apart from airbnb. I'd say, down the road, once this all shakes out, that nightly airbnb pricing will definitely go up across the board from even the most rudimentary to the most deluxe.
Wendy
Wendy2 years ago
Good to know--thanks for the info --both Maria and Susan!
Lula
Lula2 years ago
Susan, quick question, how did you expense your costs for breakfasts, toiletries, etc. i.e. What schedule did you use? Thanks!
Reply Like
Deborah
Deborah2 years ago
Thanks Wendy for this informative post! I have not heard or read much about using Schedule C for renting out rooms in one's home....everything I have seen points to Schedule E, for general room renting that is not "Bed and Breakfast" business and providing meals, for instance, here:
number hidden)/how-renting-out-your-extra-bedrooms-affects-your-taxes/
and this one:
www.rentersinsurance.com/2012/01/income-tax-issues-with-renting-out-a-room/
I think if hosts are not providing maid services, cleaning services, meals,special treats, massage, acupuncture, psychotherapy, grief counseling, baskets of goodies,or doing work as a chauffeur or tour guide for guests...just renting the furnished rooms and providing linens, then it is pretty safe to assume Schedule E applies from all that I have read. I think it is safest as well to only have expenses that fall conservatively in line with typical rental property deductions....such as utilities, repairs, maintenance, insurance, taxes, depreciation, and furniture (supplies) for furnished rooms.
Reply Like 2 likes
Linda
Linda2 years ago
I am not running a hotel or a B&B. I do not provide breakfast, and I don't try to emulate a hotel at all. I am providing a room in my house to paying guests, and I also use that same room for non-paying guests (friends and family). Yes, I clean the room in between guests, but that's not "housekeeping services." I'm sure the IRS wouldn't tell me that I am required to let guests in my home (whether they are paying or not) sleep on dirty sheets in a filthy room.
Reply Like
Victoria
Victoria2 years ago
This is great info. Thanks! Does anyone know if this applies to renters too? I rent a 2 bd 2 ba apartment in El Cerrito and list 1 room on Airbnb. My 1st year filing taxes
www.airbnb.com/groups/content/content-47790
Wendy 2 years ago
TAX ISSUES --Relating to providing hotel-like services at our Airbnb's
Antoinette24 minutes agoThis actually has larger implications than might appear on the surface. I just filed my taxes for 2013, and I learned a lot about the nuances of Airbnb business from a tax perspective! For instance, did you know that the IRS could claim your Airbnb hosting counts as a business (instead of as a rental) and tax the income at the 25% business rate (so, Schedule C instead of Schedule E). For example...
"In some cases, renting out all or part of your house or apartment can be classified for tax purposes as the equivalent of running a bed or breakfast or hotel. This will be the case if you dedicate a room or rooms in your home solely for the use of paying customers and never personally live in such rooms. You’ll also be classified as running a hotel business if you provide substantial services that are primarily for your guest’s convenience, such as regular cleaning, changing linen, or maid service.
In this event, your rental activity will be treated as a business for tax purposes. This means you’ll have to pay both federal income and self-employment (Social Security and Medicare ) taxes on your rental income, which will increase your tax burden. On the other hand, the restrictions on your deductions described above won’t apply, except that there may still be limits on any annual losses you’re allowed to deduct. Ordinarily, you’ll report your rental income and expenses on Schedule C (Form 1040), Profit or Loss from Business.
Obviously, the way to avoid having your rental activity being classified as a bed and breakfast is not to provide substantial services to your guests—don’t provide them breakfasts, clean their rooms each day, or do their laundry. Charge renters a cleaning fee at the end of their visit that is separate from their daily rental charge."
See more of the article: www.nolo.com/legal-encyclopedia/tax-issues-when-renting-your-home-airbnb-vrbo.html
Disclaimer: I'm not a tax professional, just sharing what I've learned!
7 comments
Following
Like
Wendy
Wendy2 years ago
This was posted as part of a non-tax related issue in another thread --it is so important that I have re-posted here--originally submitted by ANTOINETTE---thank you!)
Reply Like
Susan
Susan2 years ago
I also use my bedroom for personal purposes when not rented out. Off the hook on this one!
Reply Like
Lula
Lula2 years ago
Susan, it is not as simple as it seems. It also depends on how many days of the year you have the room 'used' by yourself , the two-week rule per year, then it is treated like a vacation home. I've just finished my taxes, first time in 10 years I had a professional do it. I previously spoke also with 2 CPA's who audit the company I work annually. It is not even clear to them. The best solution I was told, for me to use Schedule E and do not mention the breakfast portion or maid service, or "congratulations, you run a hotel" and you have to file also Schedule C. I am very familiar with schedule C, as I ran ran an internet business for 11 years. For depreciation purposes (as a residence), we need Schedule E (if we own the house), for the service part (breakfast, cleaning, etc.) Schedule C is necessary to list the expenses.. Even I had to challenge some of the assumptions of my tax preparer. I will look into filing Schedule C (in addition to Schedule E) for next year, if my numbers become too big. I suggest people become educated and read. I caught 2 mistakes (or misinterpretations done by my tax preparer office), so I am filing an amendment next week. At least I am learning a lot in the process. Ask questions, from different sources.
Reply Like 2 replies•1 like
Susan
Susan2 years ago
exactly Wendy! there are operative words here "dedicated" "amenities" which are the major ones to go by, then there is the No. of days rented etc. The way around this is *wink* NOT dedicated, and NOT providing amenities far and beyond that routinely found in one's home. Frankly, it depends upon the duration of the stay (I purposely limit my stay duration and do not dedicate a bedroom and do not provide amenities that are not normally found in the normal course of a stay in a hotel). I am quite versed in the tax stuff actually so...well, each and every Host "should" discuss their situation with a tax professional at best anyway. This will be especially important as and when airbnb begins to collect transient taxes on lodging in our city. Hosts should consider setting their nightly prices based upon their tax situation, lodging taxes and deductions, not to mention their own income tax liabilities from wages earned apart from airbnb. I'd say, down the road, once this all shakes out, that nightly airbnb pricing will definitely go up across the board from even the most rudimentary to the most deluxe.
Wendy
Wendy2 years ago
Good to know--thanks for the info --both Maria and Susan!
Lula
Lula2 years ago
Susan, quick question, how did you expense your costs for breakfasts, toiletries, etc. i.e. What schedule did you use? Thanks!
Reply Like
Deborah
Deborah2 years ago
Thanks Wendy for this informative post! I have not heard or read much about using Schedule C for renting out rooms in one's home....everything I have seen points to Schedule E, for general room renting that is not "Bed and Breakfast" business and providing meals, for instance, here:
number hidden)/how-renting-out-your-extra-bedrooms-affects-your-taxes/
and this one:
www.rentersinsurance.com/2012/01/income-tax-issues-with-renting-out-a-room/
I think if hosts are not providing maid services, cleaning services, meals,special treats, massage, acupuncture, psychotherapy, grief counseling, baskets of goodies,or doing work as a chauffeur or tour guide for guests...just renting the furnished rooms and providing linens, then it is pretty safe to assume Schedule E applies from all that I have read. I think it is safest as well to only have expenses that fall conservatively in line with typical rental property deductions....such as utilities, repairs, maintenance, insurance, taxes, depreciation, and furniture (supplies) for furnished rooms.
Reply Like 2 likes
Linda
Linda2 years ago
I am not running a hotel or a B&B. I do not provide breakfast, and I don't try to emulate a hotel at all. I am providing a room in my house to paying guests, and I also use that same room for non-paying guests (friends and family). Yes, I clean the room in between guests, but that's not "housekeeping services." I'm sure the IRS wouldn't tell me that I am required to let guests in my home (whether they are paying or not) sleep on dirty sheets in a filthy room.
Reply Like
Victoria
Victoria2 years ago
This is great info. Thanks! Does anyone know if this applies to renters too? I rent a 2 bd 2 ba apartment in El Cerrito and list 1 room on Airbnb. My 1st year filing taxes