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Preparing Airbnb Tax Information for the Year

tips for filing 2019 airbnb taxes

 

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.

 

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Is It Time to Invest in a New Vacation Rental Property?

airbnb real estate investment

This week, the Federal Reserve raised interest rates a quarter of a percent. Despite the minor increase, it’s still a great time to buy a home for first-time shoppers or a new home for those looking to move or add investment properties.

California’s real estate market is doing well overall and homes that go on the market sell incredibly fast. In fact, in some areas, homes are selling in as little as 18 days on the market! Now that’s some fast turnaround.

california real estate days on market

Let’s Talk Mortgages

According to a report from the first tuesday Journal, a California real estate reporting journal, the average fixed mortgage rate in May 2018 was up by just 1.12% (4.43%) from its lowest point over the last 30 years (3.31% in December 2012). For comparison, the highest average fixed rate over the last 30 years was an astounding 9.62% in January 1991. Though average rates have fluctuated significantly over the last 3 decades, the current numbers are still promising and offer a positive outlook for those interested in purchasing real estate in California.

All in all, things aren’t “bad” in the Golden State.

Reasons to Invest in a New Vacation Rental

If you’ve ever considered purchasing additional real estate as an investment, now might be a great time. Despite the Fed raising rates across the board, California averages are nothing to scoff at.

As they say, “There’s no better time than the present.”

Rates will likely continue to rise steadily over the next several quarters, meaning you’ll save a little more money on your investment if you can get in now.

Here are a few other reasons why taking the plunge and adding another vacation rental might be a wise investment:

 

  • You’re spending money to make money. If you’re really serious about making your vacation rental business an actual business and taking things beyond just a side gig, adding another property could potentially bring in significantly more income. LA is still very much a hot vacation spot; it all depends on where your new place would be located in town.

 

 

  • Property taxes may not be as bad as expected. Thanks to the most recent tax overhaul from Washington, D.C., the federal government will cap property tax deductions on returns filed for 2018 and beyond at $10,000. That doesn’t go very far in California and state politicians have been working to do something about it. In January, California state Senator Kevin de León spearheaded a bill that would allow taxpayers to donate money to the state in exchange for a lower tax bill. Senator de León isn’t the only one working on a solution: Assemblywoman Autumn Burke is working forward a similar solution, too.

 

 

 

 

  • You don’t have to spend a fortune. There’s something out there for every price point. You don’t need to invest in a huge, multi-bedroom home. Consider looking for a small place with enough room to host 1-3 people. If you can afford a bigger place, great. If not, stick to your budget. There will still be guests looking for what you’re offering.

 

Is it time to invest?

Ready to start shopping?! It’s all very exciting, but be sure to think things through before jumping into local real estate listings.

Here are a few questions you should ask yourself if you’re considering buying an investment property:

 

 

  • What can you put toward a down payment? These days, having a down payment is key. Lenders are less likely to offer money to cover this expense.
  • How will you manage both (or all, if you already have more than one vacation rental) of your listings efficiently? Will you enlist the help of a vacation rental management company? Will this be your new full-time job? The logistics are important.
  • Can you charge enough each night to cover your new mortgage payment each month? It’s important to do your research and have a good idea of the going average nightly rate and whether you can charge as much or more based on your home furnishings, location, and so on.

 

 

 

There’s a lot to consider when thinking about adding real estate to your investment plan. However, it has the potential to be lucrative long-term and worth the expense.

 

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