Airbnb Taxes: Tax on Rental Income and Rental Income Tax Rate

I just filed my taxes!

It was a dread that I had to face. There’s much debate in the author community about IRS forms, and most of the discussion revolves around whether you should use:

Schedule C Profit or Loss from Business (Sole Proprietorship), or

Schedule E Supplemental Income and Loss (From your rental real estate, royalties, partnerships, etc.).

I ended up choosing Schedule C because it allowed me to file for maximal deductions and because I didn’t qualify for schedule E. Schedule E is merely a passive income and it is designed for landlords that collect monthly rent from their long-term tenants.

2017 Tax Brackets

Here’s the new tax plan under our new president:

Airbnb Taxes: Tax on Rental Income and Rental Income Tax Rate

Alright, so now you’ve figured out what form to fill. Let’s go through an actual example.

You earn $15,000 in rental income from your real estate business in 2017. Expenses related to that business in 2017 totals $7,000. Your net income from writing is $8,000 ($15,000 minus $7,000). You’ll pay $800 in SE tax ($8,000 x 10%).

You are a married individual and pay $5,500 in health and dental insurance premiums (out of your pocket, not paid by an employer), and $1,500 in long-term care premiums for you and your spouse. Because of the total of your health-related insurance premiums, $7,000, does not exceed your self-employed net income of $8,000, you can deduct the full $7,000 on page one of your Form 1040 (line 29).

Helpful links:

Schedule C in pdf form / Schedule C Instructions

Schedule E in pdf form / Schedule E Instructions

Form 1040 in pdf form / Form 1040 Instructions

I’m not an expert on this. However, I mostly did my research online by reading official documents from IRS and other helpful blog posts.

( If you’re still unclear about Schedule C Vs. Schedule E, head to my other blog post.)

2018 is a great year for additional tax benefits. I would definitely consult a CPA to maximize your deductions. However, I did find an insightful book that will teach you on maximizing your deductions and minimizing potential penalties specifically for Airbnb and VRBO properties. You can buy it from Amazon and here’s the link.

Now, I’m going to relax and drink some delicious red wine to celebrate…

Interest in learning how to build your rental arbitrage empire? You can subscribe to my blog and learn tips and insights on my process of creating a profitable 6-figure passive income business using other people’s home. I write on the regular and offer free tips and insights.

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