By Mylin Batipps Jr., public relations coordinator

You may be staying at an Airbnb this year while away for the holidays. Did you ever think you could turn your own home into an Airbnb? Next year, when you book your flight to see family or visit a resort for the holidays, using services like Airbnb can turn your primary residence into a vacation rental while you are away. But you can't forget the tax implications of doing so. Based on some questions that have come in from the public through PICPA’s free Ask a CPA service, our members have provided several important tax tips regarding income generated from your property.

Your Airbnb is a business.

By renting your home out to tenants in exchange for income, you are creating a business. Airbnb, along with similar companies, will issue a 1099-MISC to tenants so that they can record what they paid to you, the host of the property. It is your responsibility to record your income on your tax return, but only if you rented out your house for more than 14 days annually. You may be responsible for self-employment taxes since you will be performing tasks essential to the business such as bookings, providing amenities, etc. Be sure to sit down with a CPA so that he or she can go through all of your tax responsibilities as a business owner.

You can reduce taxable income with expenses incurred exclusively for Airbnb use.

There are many items that are necessary for an Airbnb to function, whether they are items directly for your rentals (such as toiletries or furniture), or items for the upkeep of the space (like wall insulation or plumbing improvements). Generally, these items can be reported as expenses on your tax return, which will be deductible from your total taxable income. Expenditures of less than $2,500 can be expensed right away, while items over $2,500 will require depreciation.

Note: If you have set your Airbnb business as an LLC or a C corporation, it would generally be considered a pass-though entity and may be affected by the new tax reform bill that is in progress. The deduction rate is under debate in Congress as of this blog's writing.  

Allocate expenses appropriately if your property is for mixed use.

Perhaps you will decide not to travel for the holidays, but would still like to make space in your home available to people who are traveling to your area. When dealing with mixed-use property, it’s important to know how to divide your expenses between those that are for your personal use and those that are for rental use. When it comes to extended family or friends who may rent space in your home, treat them as you would an “outside” renter.

As seen from the tips our PICPA members have provided on Ask a CPA, there is no simple answer as to how to deal with rental income from Airbnb-like arrangements. This makes it all-the-more important to speak with a CPA in person who can walk you through your situation. To find a CPA, visit www.INeedaCPA.org.