A Simple Airbnb Tax Guide
Want to know all about Airbnb taxes? well, here's your chance!
In recent years Airbnb has experienced a sharp increase in its popularity. More and more people have come to question how tax laws function regarding their Airbnb income. No matter what type of Airbnb rental you are hosting, it is important to read up the tax law in your region to make wiser decisions.
This time on Marvelous Host, we will provide you with a general yet helpful guide on your Airbnb taxes:
- Do I have to pay taxes on my Airbnb income?
- Will Airbnb collect and pay taxes for me?
- What amount of Airbnb income is taxable?
- Can your Airbnb listing be tax-exempt or are you eligible for tax deductions?
So let’s get right to it.
Do I have to pay taxes on my Airbnb income?
Yes. As per rules and regulations worldwide, Airbnb hosts are required to pay taxes on their income. There are a few exceptions to these rules that we will cover in this article.
Will Airbnb collect and pay taxes for me?
Depending on the country you currently reside in, Airbnb will give you the option to opt out of tax collection. When opting out of tax collection, the host must remember to admit their earnings independently to the authorities as Airbnb will inform them that they have not collected tax on the property owner’s behalf.
The pros and cons of handling Airbnb taxes by yourself
When handling taxes manually, it is beneficial to consider the upsides and downsides of doing so:
One of the reasons that an Airbnb host may choose to handle taxes manually is to invest the money in other ventures and pay the tax money later. Another reason may be that the host wishes to spend the money they earn sooner and pay taxes with later earnings.
The downside to handling taxes manually is that if the host avoids taxes, the authorities may ban them from handling further businesses.
What amount of Airbnb income is taxable?
The amount of income considered taxable is different in each region and country:
The United States
In the United States, for example, an income of over $20,000 or any number of reservations higher than 200 is considered taxable and will result in the IRS (the US authority for taxing) sending the host a tax form.
Canada’s most Airbnb income is classed under rental income and is therefore taxable with few exemptions.
In the United Kingdom, Airbnb earnings are subject to VAT, although some programs exist for tax deductions or exemptions.
Furnished rentals in France are not subject to taxes as long as the host provides no services other than renting. However, tax laws regarding other aspects such as residential or property taxes are still valid. So, the host must keep them in mind.
Do not forget:
Hosts must get help and financial advice from sources in their local area to avoid hefty taxes or punishments that come hand in hand with them.
Is My Airbnb listing tax-exempt? Am I eligible for tax deductions?
Airbnb is a diverse business scene. So, there is not really any one-size-fits-all advice regarding whether or not earnings are tax exempt. Nevertheless, it is essential to remember that, in general, smaller business owners who earn infrequent income from their listings may be eligible for tax exemption. For example, in certain areas, your Airbnb earnings are exempt from taxes if you rent out a room from your primary residence.
Tax deductions are, just like exemptions, subject to different rules and regulations; however, some helpful things to generally consider are:
- Things such as the Airbnb cleaning fee, insurance, rent, mortgage, etc., may be deductible.
- There can be deductions based on the number of nights a place is hosted, the amount of income earned, and many other factors.
- Keep receipts and records of property usage. They may come in handy later.
In short, as with any business, your Airbnb listings require you to keep track of your income and calculate and plan your taxes efficiently. Doing so will result in higher earnings most of the time and provide peace of mind for up-and-coming hosts in the business.