This content is courtesy of AirGMS, all-in-one vacation rental management software specifically for Airbnb businesses. It allows users to control bookings and alterations, guest communications, as well as automate day-to-day operations.
You have decided to rent out your property via Airbnb and are thrilled about growing this venture into a proper business. However, let’s be honest, the chances are good that you are significantly less excited about paying tax.
Every individual is required to declare his/her income and pay tax to the government. Plus, since the companies that provide rental services usually also report to the revenue service, it is on no account a good idea to fail to declare your income.
So, in order for your Airbnb business to be successful, you will have to keep a meticulous record of all your Airbnb income as well as expenses and pay any tax due without delay. This is easy when you have an efficient process in place.
Three Tips for Recording Your Income and Expenses
1. Open a Bank Account
One of the first steps is to open a separate bank account that you will use just for your Airbnb venture. It might sound like more work to have two accounts, but it is actually the opposite. When you have a separate account for your Airbnb business, you will know exactly which expenses pertain to your business.
2. Enlist the Services of an Accountant
When you are renting your place via other rental sites in addition to Airbnb, make life easy and enlist the professional services of an accountant. If you are in a fortunate position to be able to rent out more than one property, an accountant is definitely a must. An accountant is well informed and will be able to tell you exactly what Airbnb hosts should keep a record of.
Besides, he/she will be able to warn you about all the possible pitfalls.
3. Automate and Try Using Accounting Software
You have enlisted the services of an accountant, but keeping a record of all your invoices, receipts and bank statements still sounds like too time-consuming. Well, why not automate your finances? There is accounting software available that will streamline this process. With the help of accounting software, you can bid entering every single transaction manually adieu! After all, time is money. Another option to track you finances is using a vacation rental software. This kind of product will also automate your work with bookings, guest communication etc.
Which Airbnb Expenses Are Tax Deductible?
There are a few tax-deductible Airbnb expenses. Why does it matter? Well, when your Airbnb income is lower, you will have to pay less tax. Though, first verify that you do qualify for rental property deductions as there are certain criteria that you will have to meet. So, consult a tax advisor who will be able to assist you with all the rules that apply to rental income.
1. Cleaning services and supplies
You will be glad to know that you can deduct cleaning services (including laundry fees). It is all the more reason to pay a cleaning company to do the dirty work. Plus, if you had to pay for the cleaning supplies, you can deduct that cost too. Be wise with your Airbnb pricing and set up an appropriate cleaning fee in order to cover for your cleaning services expenses.
2. Repairs and maintenance
A stitch in time saves nine! So, get a professional to fix that pipe or window as you can claim any repairs that you had to make to your property. Plus, as you are guaranteed to get a bad review when your property is not in tiptop shape, it is good practice not to delay any maintenance.
3. Insurance, property taxes and mortgage
When you are in the property rental business, you cannot afford not to have insurance. Airbnb insurance will probably not be sufficient to keep your business completely protected, so you will have to get business insurance too. Though, insurance can cost a small fortune (particularly when your Airbnb property is located in an area that is known for natural disasters). So, ensure that you keep your insurance and property taxes accounts. It can add up to a pretty penny.
Utilities like water, electricity and Internet can also be deducted. These days most guests are looking for free Wi-fi, so there is no reason why you can’t offer it to them. Plus, if you have a guest who has the heater on full blast 24/7, don’t sweat it as that high electricity bill is tax-deductible.
5. Household supplies
You will need furniture, fittings, bedding and additional accessories to run your Airbnb business successfully. Any money that you have spent on these items you can also deduct.
So, welcome your guests with a bottle of bubbly and some scrumptious snacks, because you can deduct it from your income. If your guests are celebrating an anniversary, why not greet them with fresh flowers? After all, hospitality is a key to success in this industry.
Any business requires marketing. When you pay for marketing, you will be able to boost your income by attracting more visitors. Plus, you will then be able to pay less tax as any marketing cost is tax deductible. This is clearly a win-win situation.
7. Professional services
Here is another win-win situation. When you enlist the services of an accountant, he/she will ensure that you deduct all the expenses that you can deduct (which also includes the accountant’s fee). However, if you have found yourself in some tax trouble, rest assured, you can also deduct the lawyer’s fees…
It is vital that you keep every single receipt. If you want to deduct an expense, you are required by law to offer evidence.
Now that you know which expenses can be deducted, reduce the mountain of paperwork and only keep the receipts that are worth saving.