Taxes can be a serious headache for short-term rental hosts. You already have so much on your plate, including housekeeping, pricing, guest questions, and reviews. That’s why we called in the tax experts from Shared Economy Tax to set the record straight about the best tax deductions for short-term rental hosts.
We sat down with Miguel Alexander Centeno, Managing Partner and Founder of Shared Economy Tax, to see how short-term rental hosts can minimize their tax expenses. In this article, we’ll cover some of the most impactful strategies we discussed with Miguel.
Before we get started, please note that all tax tips shared in this article shouldn’t be taken as professional advice. To get tax advice tailored to your unique needs, talk to a tax professional like the ones at Shared Economy Tax.
- Rent or Depreciation
We’ll start off with one of the most significant deductions on the list. You can deduct either rent or depreciation depending on whether you own or rent your home, but you’ll find that there are benefits either way.
Rent is probably one of your biggest expenses. If you rent your home and use it as an Airbnb rental, your can deduct your rent expense. Here’s a quick formula to help you determine your deductible rent expense.
[Monthly Rent Expense] x [Days rented out / Days in Month] = Total Rent Deduction
If you own your home, you can claim depreciation as a deduction. To qualify for a depreciation deduction, you must satisfy some requirements, but it’s usually worth the extra effort. Depreciation is often one of the most valuable deductions available to homeowners.
Nice furniture can attract guests and keep them coming back. Better yet, it’s also a valuable tax deduction. Furniture isn’t cheap, but you can deduct the cost of your purchases to save yourself some money on taxes. You can deduct beds, couches, desks, chairs — even decorations — as business expenses.
- Cleaning and Maintenance
As you’ve likely experienced, cleaning costs can certainly add up! However, both cleaning services and cleaning supplies for your Airbnb are often tax-deductible. This deduction includes everything from professional housekeeping fees, to a vacuum cleaner, and even laundry detergent.
Hosting puts a lot of wear and tear on your home. Fortunately, you can deduct maintenance and repair costs, so you can earn deductions while keeping your short-term rental in tip-top shape.
Utilities are an almost unavoidable expense, but you can deduct these costs on your tax return. Qualifying utility deductions include Internet, cable, electricity, water, trash, and more can fall into this category. Not only are they tax-deductible, but some of these — such as fast Wi-Fi and cable TV — are great amenities to have as well!
Do you have a gift basket for your guests? You can deduct expenses for guest treats and food too! You can claim deductions on any food and beverages you provide to your guests, including coffee, tea, water, snacks, chocolate, and more.
Food and snacks make guests comfortable, and complimentary treats can greatly increase your odds of getting a 5-star review. Best of all, these items are tax-deductible, so be sure to keep records for every purchase!
These are just a few examples of the many deductions available to your short-term rental business. Other examples of deductible expenses include home improvements, marketing costs, software (including Airbnb fees and dynamic pricing tools like Beyond), and more.
Each deduction has its own qualifications and nuances, but saving your receipts will cover your bases in most instances. Make sure to track every purchase, even the small ones, because they can really add up over time and save you lots of money on taxes.
Save yourself a headache and sign up for a one-on-one strategy session with the Airbnb tax experts at Shared Economy Tax. Their tax pros can help you with your toughest Airbnb tax questions and much more.