Airbnb Taxation

In only 10 years, Airbnb has developed into a $31 billion industry with offices worldwide. To date, more than 100 million guests have shunned expensive hotels during their travels and instead choose the online booking service to rent other people’s homes, apartments and spare rooms.

Although there have been some reported thefts, property destruction and sexual assaults by hosts and guests (as well as discrimination claims, numerous lawsuits with cities and management companies, and some hefty fines in some cities for violating local short-term rental laws), the company is continuing to gain popularity and is making home-renting a mainstream activity. There are an estimated 640,000 hosts currently earning extra cash through this service, with roughly 2.3 million current listings.

Airbnb rental income is taxable

Airbnb receipts are taxable much like all other rental property income. U.S. taxpayers must report and pay taxes on their Airbnb rents, which includes not only rental payments, but also cancellation fees, utilities, meals and cleaning services paid for by guests.

Note that income received for renting out your personal residence for less than 15 days during the tax year is not considered taxable rental income.

Allowable deductions

Airbnb hosts are permitted to deduct many expenses connected with their rentals. Following are some of the permitted deductions:

  • Airbnb service fees
  • Other advertising fees and fees paid to collect rent
  • Guest refunds made following a cancellation or reservation change
  • “Airbnb Open” convention fees
  • Other educational programs and conferences on property management
  • Property management fees (legal, real estate, and accounting)
  • Homeowner’s association fees
  • Property maintenance and repairs
  • Property taxes and insurance
  • Rents paid by tenant hosts to property owners
  • Mortgage interest, and amortization of points paid to acquire the mortgage
  • Utilities (electrical, gas, internet, television, garbage collection, etc.)
  • Cleaning services and supplies
  • “Ordinary and necessary” travel expenses
  • For property owners, depreciation on the basis (purchase price, including fees and costs of acquiring the property) and improvements made to the property

Note that expenses can only be deducted for the period (and space) in which the property has been used for rental purposes – if the property is rented for only part of the year, and/or if only a portion of the property (e.g., just a room) is being rented out, expenses must be prorated by the time and/or square footage of the rental period.

Local occupancy tax

Occupancy tax (also known as hotel tax, lodging tax, room tax, sales tax, or tourist tax), is a state or county tax on the rent of rooms. Where required, it is generally paid for by the guest but the host must deliver the funds to the tax authorities. In some locations, including San Francisco, Airbnb handles the collection and remittance of the tax on behalf of the host.

California county occupancy taxes range from 9.5% to 14% of the listing price, including any cleaning fees for stays of 30 nights or less.

San Francisco full service tax firm

The tax lawyers and accountants at Moskowitz, LLP understand the intricacies of real estate and taxation. For tax preparation assistance, if you are being audited, or if you require other legal tax assistance, call our San Francisco office at (415) 394-7200.