Thinking of being an Airbnb host? First, check your town’s regulations; the rules vary. Then there are taxes .
“If you don’t handle the rental income properly on your tax return, you might end up with high penalties and fees from the Government,” says Joshua Zimmelman, president of Westwood Tax & Consulting.
Many people mistakenly think they can deduct 100 percent of their household expenses, such as mortgage interest and property taxes, or rent, against their Airbnb income, explains Abby Eisenkraft of Choice Tax Solutions.
If you have a spare room that’s always used as an Airbnb rental (never as a guest bedroom for family or a playroom for the kids), you must apportion the percentage of expenses that are deductible, she says. If the room’s size is 10 percent of the entire house, you can deduct 10 percent of your allowable expenses.
If you rent your entire house, but move back in when there are no Airbnb guests, again, you cannot deduct all of your expenses. You’ll need to calculate the percentage of days booked with Airbnb vs. days of personal use.
Truth is, Airbnb can complicates your taxes. For many, the headaches may outweigh the extra cash in their back pocket.