Every Airbnb Host’s Tax Guide

209 Pages·2018·2.34 MB·English

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Every
Airbnb Host’s
Tax Guide
Stephen Fishman, J.D.
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2nd Edition
Every Airbnb
Host’s Tax Guide
Stephen Fishman, J.D.
LAW for ALL
SECOND EDITION AUGUST 2018
Editor DIANA FITZPATRICK
Book Production SUSAN PUTNEY
Proofreading SUSAN CARLSON GREENE
Index RICHARD GENOVA
Printing BANG PRINTING
Names: Fishman, Stephen, author.
Title: Every Airbnb host’s tax guide / Stephen Fishman, J.D.
Description: Second edition. | Berkeley, CA : Nolo, 2018. | Includes index.
Identifiers: LCCN 2018005127 (print) | LCCN 2018006105 (ebook) | ISBN
9781413325522 (ebook) | ISBN 9781413325515 (pbk.)
Subjects: LCSH: Bed and breakfast accommodations--Taxation--Law and
legislation--United States. | Vacation rentals--Taxation--Law and
legislation--United States. | Rental housing--Taxation--Law and
legislation--United States.
Classification: LCC KF6495.H67 (ebook) | LCC KF6495.H67 F57 2018 (print) |
DDC 343.7306/6--dc23
LC record available at https://lccn.loc.gov/2018005127
This book covers only United States law, unless it specifically states otherwise.
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tive holders. Use of them does not imply any affiliation with or endorsement by them.
AIRBNB is a registered trademark of Airbnb, Inc. FlipKey is a registered trademark of
FlipKey, Inc. HomeAway is a registered trademark of HomeAway.com, Inc. VRBO is a
registered trademark of VRBO.com, LLC.
Please note
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Acknowledgments
Many thanks to:
Diana Fitzpatrick for her outstanding editing
Susan Putney for book design
Susan Carlson Greene for proofreading
Richard Genova for the index
About the Author
Stephen Fishman has dedicated his career as an attorney and author
to writing useful, authoritative, and recognized guides on taxes
and business law for small businesses, entrepreneurs, independent
contractors, and freelancers. He is the author of over 20 books and
hundreds of articles, and has been quoted in The New York Times, Wall
Street Journal, Chicago Tribune, and many other publications. Among
his books are Every Landlord’s Tax Deduction Guide; Deduct It! Lower
Your Small Business Taxes; Working With Independent Contractors;
and Working for Yourself: Law and Taxes for Independent Contractors,
Freelancers & Consultants. All are published by Nolo. His website is at
www.fishmanlawandtaxfiles.com
Table of Contents
1 Introduction: Who This Book Is For ...................................................................1
2 How Short-Term Rental Hosts Are Taxed ......................................................3
Income Taxes .......................................................................................................................4
Social Security and Medicare Taxes .......................................................................11
Net Investment Income Tax ......................................................................................14
Local and State Occupancy Taxes .........................................................................16
3 Tax-Free Short-Term Rentals .................................................................................19
Short-Term Rentals That Qualify for Tax-Free Treatment ..........................20
Effect of Qualifying for Tax-Free Treatment .....................................................24
4 Deducting Your Expenses: The Basics ............................................................27
What You Can Deduct .................................................................................................28
How Your Tax Status Affects Your Deductions .............................................30
Deductions for Multiple Owners ............................................................................35
5 Operating Expenses ....................................................................................................39
What Are Operating Expenses? ..............................................................................40
Direct Expenses Deductible in Full ........................................................................41
Operating Expenses That Must Be Allocated ..................................................51
6 Repairs ..................................................................................................................................59
Repairs vs. Improvements ..........................................................................................60
Deducting Repairs for Short-Term Room Rentals ..........................................62
Three Safe Harbors ..........................................................................................................63
Repair Versus Improvement: Analysis Under the Regulations ................70
How to Deduct Repairs and Maintenance ........................................................72
When Guests Pay for Repairs ....................................................................................73
Properly Document Repairs .......................................................................................74
7 Deducting Long-Term Assets ...............................................................................75
Depreciating Property Used in Your Rental Activity ..................................77
How to Depreciate Real Property ...........................................................................78
Personal Property ...........................................................................................................86
8 The Pass-Through Tax Deduction ..................................................................101
Your Rental Activity Must Be a Business .........................................................102
Your Rental Activity Must Be a Pass-Through Business ...........................102
You Must Have Qualified Business Income ....................................................103
You Must Have Taxable Income ...........................................................................104
Calculating Your Pass-Through Deduction .....................................................105
Taking the Pass-Through Deduction ..................................................................109
Strategies to Maximize the Pass-Through Deduction ..............................110
9 Prorating Your Deductions .................................................................................113
Direct Expenses Are Fully Deductible ...............................................................114
Expenses That Must Be Prorated .........................................................................115
Calculating Personal and Rental Days ...............................................................118
10 Reporting Rental Income on Your Tax Return ......................................123
Most Hosts Use Schedule E to Report Rental Income ............................124
Schedule E Line-by-Line.............................................................................................125
Completing Schedule E When You Have a Rental Loss ...........................133
Hosts Who Don’t File Schedule E ........................................................................139
11 Filing IRS Form 1099 Information Returns ..............................................145
When Someone Else Reports Your Rental Income to the IRS ..............146
Reporting Payments You Make to ICs and Other Workers ...................148
Back-Up Withholding for Independent Contractors ................................152
12 Deducting Losses for Short-Term Rentals .................................................153
What Are Rental Losses? ...........................................................................................154
Which Rental Loss Rules Apply .............................................................................155
Vacation Home Rules .................................................................................................156
Hotel Business Rules....................................................................................................163
Regular Rental Activity Rules .................................................................................168
13 Record Keeping ...........................................................................................................171
What Records Do You Need? .................................................................................172
Tracking Income and Expenses .............................................................................174
Supporting Documents for Your Expenses ....................................................177
Property Usage Record ..............................................................................................185
Index
..........................................................................................................................................187