Bookkeeping & Taxes for Your Short Term RentalAug 21, 2020
Bookkeeping is an integral part of a vacation rental business. This is because the government recognizes it as a business activity and levies income tax over the income earned by the owner. Companies like Airbnb, Booking.com, VRBO, and others have become very popular and more and more owners are using these platforms to earn attractive incomes from their properties. Here are some useful tips to save your hard-earned money from being charged as tax by the government.
Learn the 14-day Rule
You are not required to pay any tax on your income if it has been rented out for no more than 14 days in a given year. For this rule to apply, you must have lived in the same property for at least 14 days. However, be careful that you do not rent out your home for more than 14 days as otherwise, your income attracts income tax.
There are Some Exceptions Regarding Rooms
You cannot rent out one room in your property and hope to get an exemption just because you continued to live in the rest of the property. However, if the room has been rented out for 14 days or less in a year, you need not report any income earned from a vacation rental.
Maintain Accurate Records for Taxes
Whether you are earning very little or a huge amount of money from your vacation rental, make sure you treat it as a business activity and keep accurate and up-to-date records of all transactions. There is no need to worry about taxes if you have kept the records in a meticulous manner.
It may be a good idea to form an LLC and run your STR business through your LLC. If you do this, and even if you don’t, keep everything separate between your home/personal expenses and your business expenses. Never co-mingle funds. Keep receipts and records for everything separate.
Expenses can be Deducted from Rental Income
Like any other business, you are entitled to deduct all your ordinary and necessary expenses from your rental income. Whether you buy towels for guests or place new cutlery in the kitchen, you should keep all receipts and add up all your expenses to get relief from income tax charged over your income.
You Are Also Entitled to Deductions, Like Guest Services
If you are getting your bookings from AirBnB or any other company, you will find that it is deducting a percentage of your rental income in the form of guest service fees. This information is provided by Airbnb to the IRS in 1099 form. You can deduct the entire amount from your rental income when filing your income tax returns at the end of the year.
Now go and grow!
Michelle R Russell
© The Prosperity Process, LLC
Want to hire a Virtual Assistant but don't have a clue about how to get started...
We've created a program just for you inside our membership, VA Advantage. Not a member yet? We've got you covered, too. We've made this program available for "outsiders" for a limited time and for less than $20. Grab it now before it's too late!
Go and Grow...
If you want to become financially free, you need the right education. That’s why we created our Mini-Courses on investing in Short-Term Rentals. If you are serious about investing your time and money into an Airbnb (aka Short Term Rental), you need a system. Our courses are jammed packed with everything you need to know to create massive, passive income. Plus, they're affordable.
and take a look at July's BNB Budget Makeover Series inside our blogs...
This month, we give you loads of great ideas on using your orphan days to make inexpensive changes to your properties. Begin here, with Budget Room Makeovers: Weekend Projects for Under $1000.
Don't miss a beat!
New articles, blogs, podcast episodes, and courses delivered to your inbox.
We hate SPAM. We will never sell your information, for any reason.