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Preparing Airbnb Tax Information for the Year
It’s that time of year again: tax season! As a vacation rental owner, filing your Airbnb taxes correctly is absolutely vital to the longevity of your business. Whether you rent your property as a side hustle or a full-time venture, botching your taxes can lead to high fines and penalties from the IRS.
Fortunately, there are ways to make this time of year a little easier on yourself. Being prepared for tax season can save you a lot of time, energy, and stress. Here are 3 things to keep in mind as you’re getting your Airbnb tax information together if you want to come out on top.
1. Know the rules.
If you are considered self-employed by the IRS, you’ll have to remember to pay self-employment taxes in addition to any applicable occupancy taxes. Certain cities and states have their own requirements about the amount of tax you must pay when you operate a vacation rental, so be sure to do your research so you’re not surprised later on.
If you’re renting out just one room of your home instead of the entire property, you’ll have a slightly different set of rules to follow. Read up on the federal and local requirements to make sure you don’t miss anything important.
2. Go digital.
Paper receipts are easy to lose. It’s a good idea to create digital copies of all receipts that you accumulate throughout the year, backing up those copies to a Cloud database. Apps like Quickbooks or Expensify make it easy to keep track of your paper receipts and stay on top of your budget at the same time.
If you haven’t been scanning your receipts, now is a good time to start: in the event of an IRS audit, you’ll need to procure copies of all of them. You are expected to keep all receipts for up to 3 years after filing, so it’s worth taking the time to get organized.
3. Ask for more time if you need it.
If you get overwhelmed, don’t be afraid to file for an extension. While it’s a good idea to get started on your taxes far enough in advance, sometimes the deadline sneaks up on you. If you don’t think you can get your Airbnb tax information compiled on time, look into whether you qualify for an extension and submit the necessary forms to do so.
4. Hire a professional.
Filing your taxes gets trickier when a rental property is involved. Factor in any additional income, charitable contributions, or other special circumstances and you might have a mess on your hands. When in doubt, hire a professional to file your taxes for you. Try to find a tax professional that specializes in vacation rentals as there are specific laws and forms that must be considered when filing.
Tax season doesn’t have to be the most dreadful time of year. If you get organized, start early, and know the rules, your taxes can be a breeze. A little preparation goes a long way towards making sure your finances run smoothly even after April is over.