Tax Day Complications for Airbnb Landlords

by Lark Turner

Tax Day Complications for Airbnb Landlords: Figure 1
A DC Airbnb rental.

How are taxpayers filing their Airbnb income? Not without a headache, if they’re approaching the problem at all, according to a report from Vice.

While Airbnb, the fast-growing business that allows people to rent out all or part of their homes to short-term renters, has expanded rapidly since its founding in 2008, it’s also spent plenty of time fending off accusations from the hotel industry that it is avoiding taxes. That same scrutiny has begun to shift to homeowners, too, some of whom pull in quite a lot of money through the site without paying taxes on the income.

But Airbnb income is taxable income, and as the company gains legitimacy, it’s been working with municipalities to ease tension with regulators and the hotel lobby. Most recently the company announced that it would begin charging renters a hotel tax in Portland and San Francisco as part of its Shared City initiative. But in fact the company’s fine print puts all liability on the landlords and renters.

UrbanTurf reached out to Airbnb and DC earlier this year for details on how landlords can make sure their units are legally rentable to short-term tenants, and the city got back to us with a set of regulations that apply to such housing. Airbnb didn’t comment for that article except to note how popular the service is in DC — and how quickly it’s expanding here.

The Vice article looks at how freelancers use Airbnb to supplement their income in high rent cities and the difficulty in understanding how that income should be reported.

From Vice:

“On the one hand they need the extra income; on the other hand it’s not easy in this city to be in compliance,” said Jonathan Medows, a Manhattan CPA who also specializes in freelancers. “They’re kind of caught between a rock and a hard place.” The CPA said it’s the company that should be scrambling for a solution, since the site makes money no matter what users end up owing or how hard it is for them to pay.

There are a couple IRS-related complications when it comes to Airbnb income. For one thing, some of the expenses used to bring in renters are deductible; others aren’t. For another, different states and localities may have different rules about what is and isn’t deductible when it comes to the rental income. Susan Lee, a tax professional who works with freelancers, provided an example of this problem to Vice:

Lee recently consulted a cash-strapped couple who’d used Airbnb to keep up with a rent beyond their means, only to find they now owed more in taxes than they’d made from the service, in part because of deductions they’d lost in the process. “Home offices have to be exclusively and regularly used,” Lee explained, referring to a popular freelancer deduction that also helps offset rising rents. “You can’t say it’s a home office on Tuesday at 3 but rent it out on Tuesday at 5.”

Vice noted that Airbnb has recently updated its terms of service to reflect freelancers’ desire to pay their taxes. Those don’t go into effect until April 30, though, so 2013 taxpayers are out of luck (and already late).

See other articles related to: airbnb taxes, airbnb dc, airbnb

This article originally published at http://dc.urbanturf.com/articles/blog/tax_day_headache_for_airbnb_landlords/8371


  1. DC resident said at 9:00 pm on Thursday April 17, 2014:
    The home office deduction can be deducted for the percentage of space that those Airbnb landlords use of their homes for business purposes. Airbnb rental income is reportable on Schedule E Supplemental Rental income just like any other small landlord must use to report rental income from small rental buildings. In DC an residential homeowner cannot lawfully get a license to rent rooms on a nightly basis unless they live in part of the house they are renting out. The definition of taxable income is money earned from whatever source derived. Airbnb revenue is self employment income and must be reported and paid as such. Self employment tax law requires a quarterly income tax return to be filed and money paid for self employment taxes. While these homeowners think they are making easy , quick money As with anything else that generates income The taxman is indeed a partner. There are no free lunches. Neither commercial hotels nor condo or homeowners who are next to properties that are being used as nightly rentals are going to sit back and let these people make tax free money while the rest of us pay for businesses licenses, permits, pay hotel taxes and income taxes. When you decide to use a public source of revenue genereating(Airbhb's website) income received by a landlord on their site is easily trackable.
  1. taxpayinglandlord said at 11:33 pm on Friday April 18, 2014:
    Who is looking to make tax free money? Point of the article is that things are complicated. and DCRA is a proverbial sh!tshow. i'd love to play by the rules but they make it incredibly difficult. Why should we be surprised? There are three levels of taxation that is being discussed.. hotel tax, income tax AND self employment tax. And my understanding.. rental income like any other landlord income is NOT considered self employment income unless extra services (laundry, meals, etc) are being included. And then there's the business licensing. single family license? B and B license like this is stating? And what if we use Airbnb to rent out for more than a month? it's ridiculous. call DCRA ten times and you'll get ten different answers. or maybe just 8, because one person will hang up on you and the other will say they'll get back to you and don't. People are still going to rent out their rooms, it just may not be through Airbnb. at least this offered somewhat of a safer way to do it. but it's like getting building permits.. until they fix DCRA people are going to do things under the radar not because they're trying to get a free lunch but because they don't want to get screwed by our broken system.
  1. James said at 12:33 pm on Saturday April 19, 2014:
    DCRA is/are a freak show. Half of their employees are in front of the building smoking, eating, or running their pie-holes at any given time. And they are racist. But I digress. The smart way to handle AirBnB income is to report it as rental (not self-employment) income federally, and follow as many of DC's childish regs as you possibly can, conveniently. Never cross the feds. As for DC, catch us if you can. You are too slow, and too incompetent to keep up. Have another smoke outside.

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!