As Airbnb’s popularity continues to rise, more and more people are renting out their homes and learning about the tax implications that come with it. When you rent your home, or a room in your home, as a short-term rental, you may be able to keep your income taxes to a minimum and sometimes eliminate them entirely if you follow some of these useful tax tips.
Learn About the 14-Day Rule
The 14-day rule is very important for anyone considering renting out a personal residence. Under this rule, you don’t pay tax on income you earn from the short-term rental as long as you rent the property for no more than 14 days during the year AND use the home yourself 14 days or more during the year or at least 10% of the total days you rent it to others at a fair rental price.
Keep Records of Rental Periods
If you rent out your place for two weeks or less, keep track of both rental days and those days you used the residence yourself. If you rent for longer than the 14-day exception period, keep detailed records of the dates so you can separate what expenses are considered personal and what expenses are business. Keeping good records will help document your rental activity as a short-term vacation rental.
Don’t Worry if You Have to Prove You Have a Short Term Rental
The rule is simple: you don’t have to report rental income if you stay within the 14-day rule. However, because of reporting laws, companies like Airbnb, HomeAway, and VRBO may report to the IRS all income you receive from short-term rentals, even if you rent for less than two weeks. If this happens and you don’t include the income on your tax return, the IRS may ask you for information regarding your short-term rental.
Don’t worry: your detailed records of your rental activity will show that your rental was a short-term rental.
No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.
