If you have contemplated the possibility of using your home as an Airbnb, there are several factors you should consider before you begin to receive guests. While there are multiple benefits to utilizing this service, there is also the potential for problems to arise if you have not researched necessary information before creating a listing for your home.
From tax guidelines to service fees, you will need to carefully consider everything before using your home as an Airbnb.
Refer to the following information to determine if using your home as an Airbnb is a viable option for you. If you choose to utilize this service, you could add an extra $7,500 to your income each year if you rent your home on a consistent basis. You may then choose to use a portion of this money to help pay your mortgage or even make improvements on your home.
Additionally, there is the potential to make even more money if you choose to welcome guests on multiple occasions throughout the year. The smart move is to fully understand what you are getting into beforehand so that you can position yourself to make as much money from the venture as possible.
Understanding Tax Guidelines for Airbnb Homes
Before you create a listing on Airbnb, you should form an understanding of the tax guidelines that come along with renting your home for an additional source of income. You will need to abide by the stipulations regulated by the IRS to ensure you are conducting business properly and legally. If you intend to use your home as an Airbnb on an infrequent basis, you may not need to report your earnings as income when it comes time to file your taxes.
If you have guests stay in your personal home for 14 days or less per year, the money you earn does not need to be reported as income. However, Airbnb is legally required to send the IRS necessary tax forms indicating how much homeowners earned per year on the website. Some Airbnb hosts, though not all, will receive a letter from the IRS requesting them to pay taxes for the unreported income. If this happens to you, you will need explain in a letter why it is not income and you will need to provide proof to support your claim.
If you plan to use your personal home as an Airbnb for more than 14 days per year, you will need to report your earnings to the IRS as income when you file taxes. You may be able to take out deductions when you are itemizing for your tax return, but you will need to read the itemization guidelines to determine what qualifies.
This tends to change each year. Regardless of how long you choose to accept guests annually, it is important to remain organized and to keep track of how much you have earned. This will help you to complete your taxes more easily when it comes time to file.
If you choose to use a vacation home as your Airbnb destination, you will need to report your earnings as rental income when filing your taxes. The costs associated with rental income can be deducted as well, though you will need to provide these in a separate section than those listed in your personal income deductions. Keep in mind that if you rent out your home, you may need to purchase additional home insurance coverage.
How to Stock Your Home for Airbnb Guests
Once you have decided to open your home to guests on Airbnb, you will need to ensure your home is properly equipped with necessary items. While it is not mandated, Airbnb suggests that hosts keep certain supplies handy before the arrival of new guests. Amenities you will need to provide to guests include:
- Clean towels.
- Clean linens.
- Toilet paper.
- Keys or digital access codes.
- Other essential items.
You may find it useful to have one set of linens and towels specifically for guest use to ensure you are easily keeping track of clean items. Additionally, you will need to perform basic cleaning tasks before and after your guests have completed their stay at your home. The room your guest will stay in is the top cleaning priority. However, you will need to maintain a clean home if you wish to continue offering services through Airbnb.
Cleaning and maintaining bedrooms and common areas of the home will help to improve the experience of your guests and will help you to attract the attention of others who are looking for somewhere to stay in the future.
Benefits of Using Your Home as an Airbnb
Using your home as an Airbnb provides a stable source of income, but it can also provide other benefits as well. If you choose to list your home through the Airbnb website, you can use the additional income to help pay down your mortgage faster and at a lower interest rate. Depending upon how much you choose to rent a room in your home for, you can use the earnings to pay your mortgage payment each month. In doing so, you will be able to use your regular income to afford utilities and other expenses you may incur throughout the year.
The income you receive from using your home as an Airbnb can also be used to make any necessary home improvements you may need. If you want to improve the quality of your home for yourself and your guests, you can use the earnings you have made through Airbnb to accomplish this task. If you want to repave your front walkway or purchase new tile for a bathroom, your earnings from Airbnb can make this easier to manage. Additionally, if you make improvements throughout the home and enhance the experience of your guests in doing so, you may be able to charge more per guest and increase your earnings in the process, provided your home’s location can justify the increased price.
There are certain lenders offering Airbnb hosts the option of including their earnings when requesting a refinancing option for their current loan. In doing so, you may be able to reduce the interest rate on your mortgage and in turn reduce your monthly payments as well. The initiative is still in the beginning stages, but you may be able to utilize this benefit in the future once you have begun to earn a steady income from using your home as an Airbnb.