Airbnb Expenses You Can Deduct – A Comprehensive Guide

Renting a property on Airbnb won’t be profitable if you do not know how to deduct expenses. It goes beyond just providing a comfortable stay for your guest all the time.

As a host, you must also learn to check all costs to maximize profits. However, this will be hard if you do not understand the tax implications of your rental income.

It may give you a hard time generating good income from hosting. You must know what expenses you can deduct to reduce tax liability.

This article will explain the different Airbnb expenses you can deduct from your rental income.

Rental Expenses

Rental expenses can reduce your income, which is subject to taxation. At the same time, it will help you improve your rental property cash flow. It will give you much leisure time to budget your total funds.

It could be the fund for property maintenance, upgrades, and any necessities done for the property.

• Mortgage Interest: The loan interest you pay on the rental property can be deducted. The majority of Airbnb hosts are making these significant deductions.
• Property Taxes: Don’t forget to keep track of your property taxes, as they are another deductible expense on Airbnb. Always check the payments you have made throughout the year.
• Insurance: If you have insurance in your property, it is also deductible. It can be homeowner’s insurance, liability insurance, and any insurance policies used for your rental.

Utilities

Another thing that can be deducted from your Airbnb expenses is the utilities as long as you are using a portion of it exclusively for your rental.

You can choose to deduct a utility cost percentage. For example, if you are 30% using electricity to host guests; therefore, it is deductible.

The water, including the gas used for Airbnb, is also part of it. If you provide internet and cable inside your property for guests, they are also deductible.

Repairs and Maintenance

Your repair and maintenance expenses can also be deducted from the year incurred. These kinds of repairs can be repairing leaky faucets or replacing a broken window.

Maintenance such as lawn care, pest control, and cleaning services are also deductible. When you hire a plumber to fix the faucet, keep the invoices and receipts as proof of expense.

Furniture and Appliances

The furniture and appliances belong to the capital improvements whether you have an upgrade or an added one. For example, the cost you have acquired from furnishing your beds, sofas, tables, and chairs.

Your appliances, such as refrigerators, stoves, and washing machines, are used inside the property. You may create an asset register to keep a check of all lists of furniture and appliances in your Airbnb property.

Cleaning and Linens

The operating expenses for your property are the cleaning services and linens.  They are considered generally tax-deductible.

It is deductible if you pay for cleaning services to maintain the property’s cleanliness consistently. You can calculate how much you spent on the linens, towels, and toiletries you’re providing guests.

Marketing and Advertising

Other expenses that can be deducted from your Airbnb are marketing and advertising. If you have been spending to promote your visibility online, it is considered a necessary business expense.

It could be the amount you pay to list your property on other platforms, social media ads, and flyers.

Travel Expenses

Suppose you are traveling for business purposes, like visiting the property for maintenance and inspection. You can deduct the mileage driven.

In addition, the cost of staying in accommodations while traveling for Airbnb is deductible, especially if you’re traveling between multiple rental properties to clean or meet guests.

Professional Services

Do you consult a professional services property management company for your rental property?  You can also deduct them from your overall income, reducing taxable income, especially when consulting for legal and accounting.

The fees you have paid for lawyers and accountants on your Airbnb business are part of professional services.

Home Office Deduction

To calculate your home office precisely, you may do it through the Internal Revenue Service (IRS). It allows you to deduct $5 per square foot of your home office space, which can be up to a maximum of 300 square feet.

Through this, the calculation process for you can be easier. It’s easy to identify if you are qualified for a home office deduction.

It is when you use a portion of your home exclusively for Airbnb. The IRS offers a simplified method for calculating the home office deduction.

This simplified option can make the calculation process easier for landlords to claim the deduction.

Depreciation

Your rental property cost can be depreciated over time. In addition, you can account for the times of wear and tear on the property.

But wait, depreciation for tax deduction requires a lot of steps. You have to calculate accurately to claim the depreciation expense. Below is a guide on how you can do depreciation for tax deduction:

• Understand Depreciation Rules: Take time to read the depreciation rules, recovery period, and methods applicable to you by the IRS. If your property is a residential rental, it is typically depreciated over 2.15 years through the MACRS method. You have to calculate the initial cost of your property. It includes the purchase price, settlement fees, closing costs, and anything that can add value to property life.
• Identify Depreciable Components: This is where you should separate the cost basis of the property. You can divide it into land value, building value, and other depreciable components. Choose an appropriate depreciation method for every element based on the recovery period. The MACRS method can accelerate depreciation, typically taking around 27.5 years for residential properties.
• Calculate Depreciation Expense: You can calculate it annually through the IRS depreciation tables or tax software. Keep a schedule for property cost basis, depreciation method, recovery period, and other documentation. It will help you in tax reporting and compliance.
• Claim Depreciation on Tax Return: Report the depreciation expense on your tax return using Form 4562, Depreciation, and Amortization.

Consult With an Accountant or Tax Professional

Consult with a CPA to help you identify all the deductions you are eligible for as a host. A CPA can guarantee you comply with all tax laws and regulations related to Airbnb income.

They help you avoid penalties or issues with tax authorities. A CPA’s role is to help you in tax planning and give you legal advice.

They track the expenses related to your Airbnb business and maximize deductibles. They can also communicate for audit support on your behalf.

Conclusion

To have a good track of Airbnb expenses, you must learn to keep detailed records. It can help you throughout the year with tax deductions.

You can use any accounting software or apps to keep track of your total expenses. You may also consult a tax professional or accountant to maximize your deductions.

With their assistance, you will not be unaware of tax regulations in your place. As an Airbnb host, your goal is to grow your earnings in the long run.

The above Airbnb expenses can help reduce tax liability and increase profitability.