IRS Announces New Help Center for Vacation Rental Property Tax Requirement

Posted on May 12, 2017

If you are like millions of travelers worldwide who have used home sharing sites like Airbnb or VRBO, you know that these services are an affordable way to travel to some very expensive parts of the world. If you are the owner of a property who offers either your home or a room for rent, then you know it can be a great way to supplement your income with not much work.

However, if you plan to rent out your home, you should be aware of the related tax implications of doing so. The IRS recently launched its Sharing Economy Tax Center on its website which guides individuals who offer their homes or cars in rental or sharing agreements about the tax implications of income received from such agreements.

According to the IRS, when it comes to renting out your home or apartment through a service like Airbnb or VRBO, including a vacation home, the “rental income must be reported on your return in most cases.” Property owners can deduct some of their expenses, but there are special rules. Deductible expenses that may reduce the amount of taxable rental income include:

Mortgage interest
Real estate taxes
Casualty losses
Maintenance
Utilities
Insurance
Depreciation

If you use the property for both rental and personal use, it is essential to keep good records of when the home is used for rental and personal purposes. That way you can divide your total expenses between both uses based upon the number of days for each purpose. Also keep in mind that, according to the IRS, you can’t deduct rental expenses beyond the gross rental income limitation.

For property owners who offer their personal home for rent for fewer than 15 days per year, the IRS does not require you to claim this rental income and you should also not declare any expenses incurred in the rental of the property. However, If you provide services that are mostly for your renters’ convenience, such as regular cleaning, changing of the linens or maid service, you will typically report your rental income and expenses on a Schedule C (Form 1040), Profit or Loss From Business, or a Schedule C-EZ (Form 1040), Net Profit From Business.

Read more about these rules at the IRS Sharing Economy Tax Center.

Are you in trouble with the IRS? Has the IRS placed a lien on your property or a levy on your bank account? Contact Chicago tax attorneys Patrick T. Sheehan and Associates today.