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rental income. This includes all income you col- lect from rent, cleaning fees and any other addi- tional fees.
How much tax will I have to pay?
The exact amount of tax you owe will depend on a number of factors, including the location of your rental property and the amount of income you earn. In most cases, you will be required to pay federal, state, and local taxes on your rental income.
State and local taxes on rental income vary depending on the location of your rental property.
What expenses can I write off?
People who rent out their homes on Airbnb and VRBO can write off a number of expenses on their taxes. These expenses can include the cost of repairs, cleaning, and furnishings. You will need to allocate rental and personal use in order to write off the expenses. In addition, rental property owners can deduct the costs of advertising and paying fees to the rental platforms. However, it is important to keep detailed records of all expenses in order to maximize the tax benefits. For exam- ple, receipts for repairs should be kept in order to prove that the expense was incurred. By carefully tracking their expenses, Airbnb and VRBO hosts can ensure that they take advantage of all the available tax benefits.
Do I need to collect occupancy tax?
The answer depends on the laws in your area, but in general, if you’re renting out a room or por- tion of your home for less than 30 days at a time, you are likely required to collect and remit occu- pancy taxes.
These taxes, which are also sometimes called lodging taxes or tourism taxes, are typically imposed by state or local governments in order
to generate revenue from visitors. They can range from a few percent to over 10% of the rental rate, so it’s important to be aware of the laws in your area before listing your property. (Massachusetts state room occupancy excise tax rate is 5.7%).
One of the benefits to renting your property through a third-party site, is that they may have an automated feature that determines which taxes are applicable for your listing,
collects and pays occupancy taxes
on your behalf. Always check to see
if this setting is available and if you
need to opt in for it to be activated.
Am I considered self-employed if I have rental income?
Unlike wages from a job or
a business, rental income isn’t considered to be earned income. Instead, it’s considered to be pas- sive income by the IRS, and there- fore is not subject to self-employ- ment tax.
Will third-party rental sites provide me with a tax form?
There are a few factors that will determine if you will receive a tax form from your third-party site. The 1099-K form is used to report income from transactions that are processed through a third party. This includes credit card payments, PayPal payments, and other forms of electronic payments. The form will report the total amount of income that you received from Airbnb or VRBO during the year, as well as the total number of transactions.
Third-party sites, such as Airbnb and Vrbo, typically will provide you with form 1099-K if you meet certain thresholds such as:
• Processed more than $20,000 in gross rental income through the platform, and
• Have 200 or more transactions during the year.
Note that these are only general guidelines, and you may still receive a 1099-K form even if you don’t meet both of these criteria.
“If you are a property owner, it is important to understand the tax benefits that come with owning rental properties.”
Maximize Your Tax Benefits on Your Rental Property
If you are a property owner, it is important to understand the tax benefits that come with own- ing rental properties. It’s important to speak with a tax professional so that you can get the most benefit from your rental properties and ensure that you are taking advantage of all available tax breaks.u
Elliot Altman, CPA, MST is a Senior Manager at the Holyoke based accounting firm, Meyers Brothers Kalicka, P.C.
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