How to Use TurboTax for Airbnb Taxes
How much taxes would I pay for my Airbnb income?
The answer depends on your total Airbnb income. The 2018 United States federal tax system has seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. If you are like some of my students, then you’d be aiming for the 24% bracket range. Check out the table below.
The US has a progressive income tax system unlike some of the other developed countries. The system is set up so that people who earn more also pay more in taxes. In Norway, people are getting taxed at around 45%.
Disclaimer: I am not a tax professional and don’t intend to play one on the internet either. Likewise, this information is based on personal research. Proceed at your own risk.
Paying Tax on Airbnb Income
Because we have a progressive income tax system in the US, there are a couple of things to keep in mind.
- People who earn more will pay more.
- People fall into tax bracket will not need to pay the tax rate on the entire bracket.
For example, let’s pretend you’ve made $82,500 as a single filer in 2018. This is how much you would pay:
- 10% up to $9,525 = $952.5
- 12% from $9,526 to $38,700 = $3,500.88
- 22% from 38,701 to $82,500 = $9,625.38
The total taxable Airbnb income for your $82,500 will be $14,089.16.
Do I have to Report Airbnb Income?
I’ve never tried this before, but maybe you can do a quick experiment? Here’s the theory:
- Don’t report your income from Airbnb.
- Wait and see how long it’ll take the IRS to find you.
Just kidding, that was a joke! 🙂
Yes, please report your Airbnb income. I would never recommend hiding income on your taxes.
How to Report Airbnb Income on Your Tax Return
Airbnb hasn’t made it easy for a host to find their total earnings. But, there are a couple of ways to see your income from your Airbnb Host Dashboard.
Step 1: Log into your Airbnb account.
Step 2: Click on your profile picture, then choose “Account Settings” in the navigation bar.
Step 3: Select your “Transaction History” on the left-hand side and boom! You’re done!
It’s easy to get this information once you know where to look. This is another method from what is stated in the official Airbnb blog post.
Once you have your Airbnb income, you’ll need to determine if you’re filing as a Schedule C or a Schedule E depending on your circumstances. I have covered this topic in-depth here if you need more information on Schedule C and E taxes.
How to File Airbnb Taxes
There are only two ways to file your taxes. 1) You can do it yourself, or 2) you can hire an accounting firm to do the work for you.
Pro-tip: If you’re just starting, I recommend doing it yourself.
When I first started in 2017, I kept a detailed record of all of my expenses that went into this business. I’ll go over expenses more in detail a little later.
Also, I followed the advice from a friend who’s actually a CPA. He told me to incorporate as quickly as possible.
The sooner you incorporate as an entity, the sooner you can claim on some of the incredible tax benefits exclusive to business owners. It’s unbelievable how easy it is to incorporate online.
Of course, there are other benefits in having an LLC. The sooner you start, the sooner you’re able to build business history and credit. That gives you a chance to work with some of the biggest real estate developers to secure arbitrage units to sublease on Airbnb.
(In case if you’re not familiar with PassiveAirbnb.com, I teach other people how to start a profitable short-term rental business on Airbnb.)
Most property management and prominent real estate developers only work with LLCs that have more than two years of history.
It took me less than 5 minutes to actually file and get my papers in the mail a couple of weeks later. (Read more on How to incorporate in 5 minutes or less)
Use Airbnb & TurboTax Tax Return
I filed my Airbnb taxes as an LLC using TurboTax for business in 2017.
The initial challenge was figuring out how to maximize my returns by using the correct form. Once I’ve figured out which form to use, everything else was super easy.
I had used TurboTax when I filed for my high-school gigs and my out of college W-2 jobs. TurboTax made filing my taxes a seamless, pain-free process.
So, I decided to give TurboTax a try for my business as well. I noticed some recent updates to TurboTax software that made it super easy for first-time business owners to file online. Of course, hiring someone to do this job is much easier, but it’s a lot more expensive.
Their business package starts at $119, but I upgraded to get the on-demand video support from one their certified accountants for an additional $60. I thought the peace of mind was worth the upgrade. Plus, I had a ton of questions, specifically around the types of write-offs I could utilize.
I paid around $250 for Federal and State. I definitely felt this was worth the price. Most of the CPAs that I called to ask quoted me $1000 to start.
(I saved myself a few Benjamins and got a really nice bottle of red wine to celebrate!)
Check out Turbotax Now!
Ready For The Challenge?
Now that you’ve got your taxes settled, or have a basic idea, do you need a refresher on your Airbnb revenue goals? I offer limited one on one coaching every month to those hoping to take their Airbnb arbitrage business to the next level.