Tax Tips for People Who "Vacation Rent" Their Homes

Vacation rental sites such as Airbnb have gotten extremely popular in recent years, and, as a result, many people have latched on to this easy way to make money and have started temporarily renting out their homes or rooms in their homes.

If you’ve rented out your home in the past year or are even thinking about doing so, however, you should know that there are taxes that go along with any profits you might make. The good news, though, is that if you know and follow some simple tips, you can pay less in taxes on your rental-based income!

Tip #1: Make Use of the 14 Day Rule

If you’re renting out your home or part of your home and you don’t know about the 14 day rule, you’re missing out. This rule states that you do not have to pay taxes on any profits made from short-term rentals.

The only catch is that you cannot rent your property for more than two weeks (fourteen days) out of the year and that you actually use the property yourself at least fourteen days during the year or 10% of the amount of days you rent it out. In other words, as long as you’re just renting out sometimes and not using the property solely to make a rental profit, you’re in the clear tax-wise!

Tip #2: Document Everything

Another tip you’ll want to keep in mind is to document everything, including and especially any expenses you incur as a result of renting out your property. You can deduct these expenses; just make sure, though, that you keep all receipts in case you get audited by the IRS.

Expenses might include things like towels and toiletries for your guests, fixing up the property, or complimentary breakfasts offered to your guests. As long as the expense is necessary and used only for the betterment of your rental business, you can deduct it.

Tip #3: Deduct Fees

Finally, if you are using one of the big-name rental booking sites, there’s a good chance that it’s charging you a percentage fee. In other words, these companies take a percentage of your earnings as payment for bringing your guests to your listing. You are entitled to deduct this fee from your taxes. Just make sure, as you should with any and all business expenses, that you keep proof on hand of the fees paid.

As you can see, there are lots of little “tax tips” that can really come in handy when you’re renting out your property. These are actually just a few of many. To learn about more tips and more awesome ways that you can save on taxes, contact your accountant. If you don’t have one, now is definitely the time to find one; these professionals know all the ways to save big!

Wednesday, February 17, 2016