The Host’s Guide to Airbnb Income Tax: Calculation & Filing

Being an Airbnb host is a compelling profession from the outside looking in. How could there be any downside to collecting rent for a portfolio of sought-after properties? While managing rental properties is attractive, hosting is not without its complications. Ongoing maintenance costs, damage from rowdy and careless renters, and high taxation are just a few of the issues that Airbnb hosts may face. There is also the added complication of handling a publicly traded third party as part of the process.

Use this article to learn about and weigh the numerous considerations and tactics Airbnb hosts can take to minimize their overall tax burden. Hosts can reinvest the tax savings into their rental properties, add new properties to their portfolio, or use them to vacation somewhere fun in someone else's Airbnb rental! 

What Airbnb Rental Income Do You Need to Report?

There are different reporting requirements for Airbnb rental income based on certain parameters. Specific occupant identity, occupancy frequency, and percentage of time split between self-occupied and guest-occupied days will determine how you will report this income. 

IRS Form 1040, Schedule E

If you do not provide any "substantial services" to your Airbnb guests, you will report your rental income or loss for the tax year on Schedule E (Form 1040), Supplemental Income and Loss. Most Airbnb hosts fall into this category. Substantial services typically go beyond what is needed in a rental, aid in your guest's convenience, and play a role in the fees charged for your Airbnb property.

Examples of qualifying substantial services include: 

• Daily cleaning service fees

• Meals and entertainment

• Professional tours of the region 

• Transportation 

Form 1040, Schedule C

While less common, some Airbnb hosts provide substantial services to their guests. In this scenario, you would report income or losses on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). 

Non-Taxable 

If you use a property as your residence and it was rented for 14 days or less in a single year, as a short-term rental, that income is non-taxable. 

Vacation Home Rules 

If you never personally use your rental property, it does not qualify as a vacation home. Still, other scenarios will qualify your property as a vacation home and impact how you deduct business expenses. Qualifications include: 

• Bedroom, kitchen, bathroom, and other basic facilities  

• The property must be used for personal purposes for over two weeks a year

• The home must be rented at fair market value for a minimum of 10% of the time

Expenses you can deduct for this type of property include real estate taxes, maintenance, and operation fees. 

Passive vs. Non-Passive Activity

Income you generate with little effort, such as rent collection, is considered "passive." In contrast, income from more demanding work, such as playing a more substantial role in your rental operations, is considered "non-passive." The passive and non-passive income you receive from Airbnb hosting may be deductible on your tax return.

You can deduct passive income losses against your passive income and non-passive income against non-passive income. You cannot deduct passive income losses against your non-passive income and vice versa. 

Calculating Taxable Rental Income

Understanding your rental property type is essential when calculating your taxable rental income. Refer to your rental type below for more information about calculating your income and other helpful considerations. 

Non-Taxable Rentals

If your residence was rented for 14 days or less in a single year, the rental income you received is non-taxable. You cannot deduct expenses related to this income for the most part. However, there are exceptions, such as deducting related property taxes from your personal income. 

Non-Personal Use Rentals

You can fully deduct non-personal use rental expenses as long as the property is eligible. To qualify, non-personal use rentals cannot: 

• Be used by you or your family throughout the year 

• Be rented at less than market value

The status of your rental property can change from year to year. One year, it might qualify as a non-taxable rental, while it might qualify as a non-personal use rental the following year. How you use your property and how much you rent it for, among other pertinent actions, will dictate your tax obligations. 

Rental Use Percentage

While expenses related to non-personal use rentals are fully deductible, there are limitations on deductions that can be taken for rental properties you occupy for part of the year. You'll have to determine your rental use percentage, a formula based on the ratio of personal and rental days, as well as the percentage of the rented property.

There are further considerations if your property qualifies as a vacation home. If the expenses you calculated via the rental use percentage exceed your vacation home's rental income, further limitations will apply that impact the eligibility of certain deductions. 

Tax Deductible Expenses

There are numerous tax-deductible expenses Airbnb hosts can take advantage of with qualifying properties. Tax deductions reduce your tax liability (what you owe to the IRS) by lowering your total taxable income. Expenses you may be able to deduct include: 

• Depreciation 

• Employee salaries 

• Maintenance and cleaning fees

• Supplies and other operating expenses

• Professional fees

• Property taxes

Maintaining accurate and up-to-date records in support of your deductions and overall operations is critical. Recordkeeping is a detail-oriented, time-consuming task. If you struggle to maintain accurate and current books, use 1-800Accountant's full-service bookkeeping solution. 

Special Considerations

There are certain scenarios and considerations to remember as you address your tax responsibilities related to Airbnb. 

Federal Income Tax Withholding

It is a best practice to ensure you provide pertinent taxpayer information to Airbnb, including your bank account and Social Security number for tax purposes, as incomplete information can create extra work during the calendar year. Incomplete tax information can lead to Airbnb withholding income taxes from your payments. If this happens, you can recover what Airbnb withheld via a tax credit, although the best course of action is to provide your tax information to Airbnb as soon as possible to avoid this scenario. Like tax deductions, tax credits help reduce the amount of tax you owe.

Another less common scenario involves managing Airbnb properties on behalf of third parties. Instead of sending income directly to third parties, Airbnb may send a payout to you directly via IRS Form 1099-K, Payment Card and Third Party Network Transactions. You should report the amount Airbnb sends on your self-employment tax return and claim a deduction of what you remitted to the third parties you're working with. 

3 Ways to File Airbnb Income Taxes

You will attach your Schedule C or Schedule E to IRS tax Form 1040, U.S. Individual Income Tax Return. Form 1040 calculates your federal taxable income and tax liability and should be submitted by April 15, 2025. You have several options for filing your tax documents with the IRS, as detailed below.  

Self, via mail

You can mail hard copies of your income tax filing to the IRS. This is the slowest submission method and may take over a month to fully process. The state you reside in and whether you're attaching a payment will determine where you send your tax materials.

Determine where you'll mail your tax return via the IRS's website.

Self, electronically

E-filing your return with the IRS is significantly faster than submitting your materials via post mail. Common submission methods include IRS Free File, a program that lets qualifying taxpayers prepare and file their federal income tax returns online for free.

Another common submission method the IRS accepts is via do-it-yourself (DIY) tax software. Process times could range from as little as a few minutes to a few hours. This is particularly helpful to individuals who address their tax responsibilities closer to approaching deadlines. 

With help from 1-800Accountant

There has never been more choice regarding rental business owners' and entrepreneurs' tax preparation and filing options. Free methods of tax reporting with tips and other guidance for eligible taxpayers and more robust DIY software are great for newer operations. While some owners can capably manage their taxes early on, embracing professional accounting services as your business scales is critical.

That's why many real estate entrepreneurs and Airbnb hosts trust the tax professionals at 1-800Accountant, America's leading virtual accounting firm, for their real estate accounting needs. Whether it's full-service bookkeeping to help generate the critical real-time insights you need to acquire a new property or tax advisory for the tax advice you need to help determine your direction for the next quarter, we offer the affordable, tax-deductible solutions your Airbnb business requires to operate in full IRS compliance with a minimal tax burden.

Schedule a quick consultation–usually 30 minutes or less—to learn what we can do for you.