A Few Tax Tips for Airbnb
Updated: Jul 27
A Few Tax Tips for Airbnb
Renting a property creates certain tax consequences. In order to stay safe and make sure that you are always following the laws and regulations, you need to learn more about taxes before you become an Airbnb host.
Generally speaking, there are two types of taxes that you should be aware of as an Airbnb host – local tax and VAT.
First of all, local tax or occupancy tax is a type of tax designed for room/property rental that local authorities or states require. The local tax must be clearly stated in your offer. You can create a special offer or require in-person payment upon arrival. Next, there is a Value Added Tax or VAT. This tax is required for properties in the European Union or China. This is a more complex type of tax and in order to learn more about it, it may be a good idea to talk to a tax expert.
Airbnb Tax Tips
Now that you know what kind of taxes are involved in the process of renting properties on Airbnb, it is time to read more about the tips and advice that can help you with these taxes.
1.- Do Your Homework
First and foremost, you should do some research. Use our latest blog entry to find out how to price your Airbnb. In this way, you can make a sound decision and decide whether you should rent your home or not via Airbnb. The truth is that in most cases you will find it reasonable and profitable to rent your property, but by doing the research you will eliminate any dilemmas. After learning more about the value and taxes you will know how much profit you can expect.
2.- Don’t forget the self-employment taxes
In case you are a self-employed individual, you should know that paying self-employment tax is a must in most countries. This tax is paid in addition to the income taxes. With this tax, you are actually contributing to the Social Security system and Medicare. It is possible for revenue agencies like IRS to treat Airbnb hosts as self-employed persons. Consult a tax advisor in your place for more info.
3.- Check the occupancy taxes
There are cases when central and local authorities are introducing occupancy taxes specially designed for rental properties that are rented for short periods of time. Keep in mind that almost every country or city has different regulations which mean that you have to do thorough research. Typically, the Airbnb host will have to collect this tax from renters and simply redirect this sum to the tax authority. However, Airbnb can collect and submit the occupancy taxes on your behalf in specific countries and cities. We at Vayoo, have written articles about regulation in London and Berlin. If you want us to do the research for you do not hesitate to drop us an email.
4.- Take away the Airbnb host-service fees
As you are probably aware, Airbnb is taking a host-service fee for every successful booking. So, when times come to pay the taxes for the last year, the revenue agencies are usually basing their calculations on the service fee included. In other words, it is possible to take away this fee and pay less in taxes.
5.- Write down every expense related to your business
Yes, being an Airbnb host is a business. Similar to any other business, this renting venture is related to certain business expenses. For instance, whenever you are buying new sheets for the beds, you are investing in your property. You are also spending money on cleaning the premises, repainting the walls, repairing certain parts of your property and more. It is very important to write down every expense related to your Airbnb business and keep official records of these expenses (invoices, receipts etc.). In this way, you will get a chance to cut the taxes.
6.- Stay calm when you get a letter from the revenue agency
In most cases, Airbnb hosts don’t have to inform the national revenue agency in case they are renting their room/property for a very short period of time (less than two weeks a year). But, there are situations when Airbnb will automatically send information to the revenue agencies and these agencies will send you a letter asking for additional information. You should stay calm and provide evidence that your property was used for a very short period of time.
7.-Talk to a tax expert
The popularity of Airbnb is reaching record high levels. This is the reason why many experts have specialized in specific issues related to Airbnb. For instance, there are many tax experts that can help you specifically with managing taxes as an Airbnb host. It’s always a smart move to talk to an expert like this.