Do you rent out your space through a service like Airbnb? Then you may be subject to home sharing taxes this filing season. After all, you need to pay U.S. income tax when you earn U.S.-source income, and this includes revenue earned from renting out your property or space.
Wondering whether you owe this year? If you host frequently, the answer is probably yes. Here’s everything you need to know about reporting and paying home sharing taxes — so you can avoid a visit from the IRS.
Which Forms to Expect
You should receive a 1099-K form if you earned over $20,000 and had 200 or more reservations with Airbnb within a given year. It’s important to note, however, that this filing threshold was recently lowered to $600 in revenue in Massachusetts and Vermont. If you meet these requirements, Airbnb will deliver your 1099-K form to you in late January. Based on your preferences, you can receive it through snail mail or electronic delivery. You can also access your 1099-K in your “Payout Preferences.”
If you’re a service provider for Airbnb — as opposed to a property owner renting out space through the platform — you may receive a 1099-MISC form, instead. In order to qualify, you must have earned $600 or more in the given year.
Keep in mind: You should always report any self-employment income you earn at tax time — regardless of whether you receive a 1099 in the mail. While it’s primarily the responsibility of the company or the payment platform in question to send you the necessary forms, it’s ultimately your duty to track and report any income you earn throughout the year.
How to Report Home Sharing Taxes
As the independent contractor, you don’t need to fill out either 1099 form. This task will be completed by either Airbnb or the payment processor that handled the transactions. All you need to do is use your 1099-K or 1099-MISC — whichever you receive — as additional assistance in reporting the income you earned from renting out your space.
The form you need to fill out will either be a Schedule C or a Schedule E on your tax return, which is where you’ll enter the amount of revenue recorded on the 1099-K or 1099-MISC. In most cases, it’ll be a Schedule E, since this form accounts for rental income. That being said, “Schedule C [should be] used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer,” according to IRS Publication 527.
What If You Don’t Receive a 1099 Form?
There’s a chance you may not receive a tax form at all, even if you earned income from renting out your space. But that doesn’t mean you don’t owe home sharing taxes. “If you receive income from a sharing economy activity, it’s generally taxable even if you don’t receive a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement or some other income statement,” according to the IRS. “This is true even if you do it as a side job or just as a part-time business and even if you are paid in cash.”
When it comes to your home sharing taxes, there’s only one exception to keep in mind: If you rented out your space or property for 14 days or less in the given year, you don’t need to report that income. Otherwise, you should plan to report the income you earned through providing home sharing services, even if you don’t see a 1099 form in the mail. As a best practice, you should keep your own detailed records and track your receipts — alongside any other documentation you might need to show proof of income and expenses associated with your side hustle. That way, you’ll be more than prepared to file come tax time.