Airbnb taxes for hosts: how to report your income

Most short-term rental income goes on Schedule E. It moves to Schedule C, with self-employment tax on top, when you provide substantial services for the guest's convenience, such as maid service. Rent out your own home for fourteen days at most in the year, and you report nothing at all. Those three rules decide most of what a US host owes.

This is not tax advice. The rules below have edges, and a preparer earns their fee on them. Hosts lose real money on the first one.

Schedule E or Schedule C

Schedule E is for rental income, Schedule C for a business. Most hosts belong on Schedule E and stay there, whatever a coaching program told them about incorporating.

You move to Schedule C when you provide substantial services, meaning services primarily for the guest's convenience. The IRS gives regular cleaning, changing linen and maid service as examples. Heat, light and trash collection do not count. No length of stay enters this test. The seven-day and thirty-day averages belong to the passive loss rules below.

What the IRS does not settle is the cleaning and linen change between two stays. That work readies the unit for the next guest rather than serving the one staying, which is the case for Schedule E. Settle that question with your preparer before you pick a schedule.

The difference is money. Schedule C income carries self-employment tax at 15.3% on top of income tax. On $30,000 of net rental profit, that is roughly $4,200 you do not owe on Schedule E.

Schedule C does not free a loss from the passive rules. A business loss stays passive unless you materially participate.

The short-term rental loophole

Rental losses are normally passive, and passive losses only offset passive income. The exception hosts call the STR loophole applies when the average guest stay is seven days or less and you materially participate. Our guide to the short-term rental tax loophole walks through both tests with the IRS sources.

The 14-day rule

The rule starts with personal use. You use the property yourself for more than fourteen days during the year. If you rent it for no more than fourteen days, the rental income is not reported at all. The provision is Section 280A(g), sometimes called the Augusta rule.

It cuts both ways. You report no income, and you deduct no expenses either. It suits the host who rents during one local event a year and lives there the rest of the time. It suits nobody who rents seriously.

Cross fifteen days of rental and the ordinary rules apply to the entire year, not only to the days above the threshold. The IRS explains how personal-use and rental days are counted in Publication 527. Read it before you assume a mixed-use property behaves the way you expect.

Form 1099-K, and why the threshold keeps moving

Airbnb issues a Form 1099-K when your payouts cross the reporting threshold. That threshold has changed three times in five years, and plenty of what you read about it is out of date.

The current rule, as the IRS states it, is more than $20,000 in payments across more than 200 transactions. The lower thresholds that were announced, then delayed again and again, are no longer in effect. This one moves. Check it for your filing year.

A platform may still send a 1099-K below the threshold. The income is taxable either way. Hosts who treat the 1099-K as the trigger for reporting are the ones who get a letter.

What you can deduct

You can deduct the ordinary and necessary expenses of the rental. If you also use the property yourself, only the rental share counts.

Platform service fees come first for most hosts, then cleaning, linen and supplies. Utilities, internet and insurance belong on the list. So do repairs, software and professional fees. If you pay a property manager or a co-host, their fee counts. Mileage to the property does too.

If you lease the home you host in, the rent is on the list. IRS Publication 527 says you can deduct the rent you pay for property used for rental purposes. That rent is the core cost of Airbnb arbitrage.

Depreciation is the deduction that changes the arithmetic. Residential rental property is depreciated over 27.5 years. The Airbnb income calculator runs it on your purchase price and shows what it does to your taxable income.

That class excludes a unit in a hotel, motel or similar establishment where more than half the units are used on a transient basis. Such a property can fall under the 39-year schedule for nonresidential real property. Pub. 527 does not say how short a stay has to be to count as transient. The answer also sets what a cost segregation study is worth.

Cost segregation reclassifies parts of the property, such as appliances, carpeting and fences, into shorter recovery periods that can be depreciated much faster. A study has its own price. Before you order one, compare the quote with what the cost segregation calculator shows it brings into year one.

Furnishings are deductible too. The amount and your elections decide the treatment. Keep those invoices apart from repair receipts. The two are treated differently, and sorting them out later is miserable.

Occupancy tax is not income tax

Occupancy tax goes to a different authority, on a different filing. It trips up hosts every year.

Where Airbnb collects and remits occupancy tax for your jurisdiction, the money never reaches your payout. It is not your revenue. Where Airbnb does not remit, the tax arrives with your payout and is still not yours. You file and pay it locally. Our host fee guide walks through where it sits in a payout.

Check your listing's tax section rather than assuming, and check again for each new property. Two units in the same state can sit in different counties with different arrangements.

The rate itself is local. Our short-term rental rules by city show what a guest pays on top of the nightly rate in each place, layer by layer.

An LLC does not change your taxes

A single-member LLC is disregarded for federal income tax, so you file the same schedule with the same numbers.

What an LLC does is separate liability. That is a good reason to form one, especially with a co-owner or several properties. On its own it is not a tax strategy, and anyone selling it as one is selling something else.

Frequently asked questions