So You Wanna Be an Airbnb Host? Part 5: Taxes, Expenses, and Making It All Work

You got an Airbnb so you could make extra money, yeah? Well, congrats, you’re officially a small business owner. You can get business credit cards based on your yearly income. Those cleaning supplies I mentioned in Part 4 are now expenses. And, you might be on the hook to pay taxes.

airbnb hosting

Evernote is key to keeping track of receipts and expenses

I personally use Evernote to save every single receipt. And tag them with the tax year and “expenses” for easy work at tax time. After a while, you definitely find your rhythm with this Airbnb stuff. You might even want to get another.

Airbnb Hosting Index:

This series is meant for peeps who want to list an entire home separate from their primary residence on Airbnb.

Do you have to pay taxes?

Here’s what Airbnb says:

“The US Internal Revenue Service (IRS) requires US companies that process payments, including Airbnb, to report gross earnings for all US users who earn over $20,000 and have 200+ transactions in the calendar year. If you exceed both IRS thresholds in a calendar year, Airbnb will issue you a Form 1099-K.”

a screenshot of a web page

108 reservations across all my listings in 2016

So, you won’t get a 1099 unless you make more than $20,000 AND have 200+ transactions per calendar year. Last year, I only had 108 reservations.

Now, the official word is that you should, of course, pay taxes on your income. But it’s not going to be reported to the IRS unless you have over 200 reservations your first year (spoiler alert: you won’t). So make of that what you will and draw your own conclusions.

In Texas (where I live), there’s so state income tax anyway, so… doesn’t really matter one way or the other.

Track your expenses anyway

This is a business, and you should treat it like one. The only way to know what’s coming in is if you meticulously track all your expenses. I highly recommend Evernote for this task.

You can also save:

  • Your cleaning schedule
  • A list of things to buy/replace
  • When you last placed an order so you can plan better
  • Photos of any damage, should it happen
  • Any instructions or manuals, so you always have them
  • Copies of your lease, bills, and any other paperwork related to your place
  • Any codes, passwords, logins, etc., related to your Airbnb utility accounts

It’s great to have all this stuff in one centralized place.

Plus, should the need ever arise, you’ll have detailed records of all your expenses in case there’s a dispute. And yes, digital records count if you’re ever audited by the IRS. No need to ever delete them. I love the peace of mind this gives me.

Try a Schedule C -or- E

I did get a 1099 from Airbnb one year, and there was no way I was going to attempt doing those taxes myself. I paid an accountant to figure it out for me. And what I learned was Airbnb income can count as Schedule C or Schedule E income on your taxes. He tried the numbers both ways and decided to go with a Schedule C.

So if you do file taxes, consult an accountant. Or at least plug the numbers in both ways to see which scenario works more favorably.

Don’t forget to earn points!

I’ve long written about using Plastiq to pay your Airbnb rent. Unfortunately, with the 2.5% fee, it’s not worth it in most cases any more – unless you’re working on meeting a minimum spending requirement.

a green sign with white text

Boo ya – my new jam

However, I just got the new Blue Business Preferred Amex that earns 2X Amex Membership Rewards points on the first $50,000 spent per year. I value each point at 2 cents each, so that’s like 4% back. With the 2.5% fee considered, it drops to 1.5% back.

While that’s not stellar, it’s something. That’s what I think I’m gonna do after this month, when 3X on my Citi AT&T Access More card stops working.

Even with rent out of the equation, you should earn points for the ongoing expenses. Purchase items after you click through a shopping portal. Stock up at Boxed when there’s an Amex Offer. Or use a card with an office supply category to get them there. The point is, you should use this ongoing organic spend to get more points and miles.

I have easily earned hundreds of thousands of points from my Airbnbs since I started doing it in 2014. You should too!

Putting everything together

So, if you’ve made it this far, you might be thinking, “God, that’s a lot of stuff going on!” It is, kinda. It’s a lot at first, for sure. It’s more when you have 2, or 3, or 10.

But the great thing about Airbnb is it scales up nicely. The costs are mostly fixed, as are the returns. So it’s fairly predictable income. The only thing you have to really worry about is getting kicked out for whatever reason (which is why you should have an exit strategy). And seasonal shifts in demand.

Barring that, there’s not too much else to think about. I know there are horror stories out there – I’ve heard them, too. But those are outliers. And most likely won’t ever happen to you.

There are car crashes every day, too, but people still buy and drive cars. It’s kinda the same concept – keep it clean, do it safe, be as cautious as possible. And you’ll most likely be fine.

After a few months, the Airbnb thing sinks into your schedule. It’s to the point now where I don’t even think about it any more – it’s become that automated. I know what needs to get done and just… do it (at the risk of sounding like a Nike ad lol).

a city with many buildings

I still travel often, even with my Airbnbs in the mix

And, I’ve still been able to travel. Frequently! Yes, I have to make sure the cleanings are set and the guests are taken care of, but beyond that, it’s been fine. Never had an issue while I was away, touch wood.

It does become a lifestyle. It’s also super fun. I love being a part of someone else’s travel story. And the extra income is nice, too.

Bottom line

That’s my treatise on Airbnb. I hope it was helpful and illuminating for you.

a screenshot of a man

Have one on me

If you’re new to Airbnb (hosting or traveling), you can get $40 off your first $75+ trip when you use my link.

I recommend Evernote to be your digital brain for expenses and tax reporting. And def use a points- or miles-earning credit card for those expenses.

In the end, I’m so glad I’m an Airbnb host. It’s truly changed my life. After a while, you’ll find your groove and it will be old hat to you. But getting started is by far the most time-intensive, expensive, and fun part of the whole endeavor. Then it becomes part of your lifestyle.

I hope I’ve explained everything thoroughly, but let me know if you have other questions in the comments. I’ll do my best to help!

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About Harlan

Just a dude living in Memphis, traveling, and working toward financial independence.

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  1. Just have to get the rest of our lives in order and then we should be able to look into getting one of these. Good series.

  2. “So make of that what you will and draw your own conclusions.”

    Good to know where your morals stand. Erosion of the taxable income base, including by tax evaders, is why the rates are higher than they otherwise would need to be.

  3. why do you say “In Texas (where I live), there’s so state income tax anyway, so… doesn’t really matter one way or the other.”?

    Obviously the major portion tax liability would be at the federal level…

    • That wasn’t my experience in New York – the lion’s share of taxes went to NYS, not the federal government. Assuming it’s similar everywhere, that’s why I had that line of thinking.

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