Is Airbnb Income Taxable? How to Report Earnings

Income from renting property through platforms like Airbnb is subject to taxation. Hosts must understand applicable tax regulations to accurately report earnings and claim eligible deductions. This ensures compliance with federal guidelines.

How Airbnb Income is Taxed

Income from renting property, whether short or long term, is taxable. The tax treatment of Airbnb earnings depends on rental frequency and services provided, determining if income is passive rental income or from an active trade or business.

The “14-day rule” applies if a dwelling is rented for fewer than 15 days during the tax year. If the property is also used personally for more than 14 days or 10% of total rented days at fair rental value, the rental income is not taxable. In this case, rental expenses are not deductible, except for mortgage interest and real estate taxes.

If rented for 15 days or more, income is taxable. When a host provides minimal services, such as only providing the space, the activity is classified as a passive rental activity. Income and losses from passive rental activities are reported on Schedule E, Supplemental Income and Loss.

The activity is an active trade or business if the host provides substantial services, such as daily cleaning, meals, or tours. Income and expenses for an active business are reported on Schedule C, Profit or Loss from Business. This classification impacts self-employment tax.

The distinction between passive rental activity and an active trade or business is important. An active trade or business means net earnings are subject to self-employment tax, covering Social Security and Medicare taxes. This classification determines correct tax obligations for Airbnb income.

Understanding Deductible Expenses for Airbnb Hosts

Hosts can reduce taxable Airbnb income by deducting various expenses. These deductions directly lower the profit subject to taxation. Tracking these costs is important.

Direct rental expenses include costs solely for the rental activity. Deductible expenses include cleaning fees, Airbnb service fees, welcome baskets, toiletries, utilities, and minor repairs.

Expenses applying to the entire property must be prorated. These include mortgage interest, property taxes, homeowner association fees, and insurance premiums. Hosts allocate these based on the percentage of rental versus personal use. For example, if a property is rented for 200 days, approximately 55% of these shared expenses are deductible.

Depreciation allows hosts to recover the cost of rental property and furnishings over time. This non-cash expense accounts for asset wear and tear. Only the rental portion of the property can be depreciated, including furniture, appliances, or structural improvements. Depreciation spreads an asset’s cost over its useful life, reducing annual taxable income.

Travel expenses may be deductible when the primary purpose is to manage, maintain, or inspect the rental property. The home office deduction may also apply if a portion of the host’s home is exclusively and regularly used for managing the Airbnb business, such as record keeping or guest communication.

Tax Reporting Requirements for Airbnb Income

Reporting Airbnb income requires understanding applicable forms and payment obligations. The process depends on how income is classified for tax purposes.

Airbnb, as a third-party payment network, may issue Form 1099-K, Payment Card and Third Party Network Transactions, reporting gross payments. For 2023, a 1099-K was issued if gross payments exceeded $20,000 and 200 transactions. For 2024, a $5,000 threshold is expected, with $600 anticipated for 2025 and beyond. The 1099-K reports gross income, not net profit.

If the Airbnb activity is a passive rental, income and deductible expenses are reported on Schedule E, Supplemental Income and Loss. Rental income is entered on line 3. Expenses like advertising, cleaning, maintenance, insurance, management fees, and repairs are reported on lines 5 through 18. Mortgage interest and real estate taxes are entered on lines 12 and 16. The net income or loss from Schedule E flows to Form 1040.

For active trade or business Airbnb activity, income and expenses are reported on Schedule C, Profit or Loss from Business. Gross receipts are entered on line 1. Deductible expenses like advertising, car and truck expenses, office expenses, and supplies are reported on lines 8 through 27a. Net profit from Schedule C is transferred to Form 1040 and is subject to self-employment tax.

Income reported on Schedule C is subject to self-employment tax, funding Social Security and Medicare. The self-employment tax rate is 15.3% on net earnings: 12.4% for Social Security (up to an annual wage base limit, e.g., $168,600 for 2024) and 2.9% for Medicare (no wage base limit). Half of the self-employment tax paid is deductible as an adjustment to income on Form 1040.

Hosts expecting to owe at least $1,000 in tax must make estimated tax payments quarterly. These payments, submitted using Form 1040-ES, Estimated Tax for Individuals, are due on April 15, June 15, September 15, and January 15 of the following year. Hosts are also responsible for state and local taxes, such as transient occupancy or sales taxes, which may apply to short-term rentals. While Airbnb often collects and remits these, hosts must verify compliance with all local regulations.

Essential Record Keeping for Airbnb Hosts

Maintaining records is important for Airbnb hosts to accurately report income and claim deductions. Documentation supports tax return figures and is useful during an IRS inquiry or audit.

Hosts should retain Airbnb host statements (gross rental income, service fees, taxes collected). Receipts for deductible expenses (cleaning, utilities, supplies, repairs) are important. Bank statements showing income deposits and expense withdrawals related to Airbnb activity should also be kept.

A calendar or log differentiating rental and personal use days is important for prorating expenses and applying the 14-day rule. Records of the property’s purchase price, improvements, and furnishings are needed for depreciation. If travel expenses are claimed, a mileage log detailing dates, destinations, and business purposes should be maintained.

Tax records should be kept for a minimum of three years from the original return filing date or two years from tax payment, whichever is later. Records related to property purchase or improvement (e.g., depreciation schedules, closing documents) should be retained as long as the property is owned and for at least three years after sale.