Many people embark on their Airbnb journey with one of three mindsets – they either have no expectations, they expect to establish a nice little side income, or they expect to build a booming business. It is to be noted that making money on Airbnb is definitely possible if the right strategy is adopted.
Most people won’t account for all of the finer details, which will actually reduce your earning potential. That includes Maintenance Costs, repairs, Airbnb commission, and those dreaded Taxes. So many are just simply unaware of the taxes involved, so they’ll probably be wondering…
“What taxes do I need to pay?”
Well, firstly, as a host you should be up to date with all of the taxes that you have a responsibility to pay. So, before we get into how it relates to your overall income, let’s discuss occupancy tax, which is something that all hosts are required to pay. If you want to learn about occupancy tax in detail, then you can check out our previous post.
Although, in a nutshell…
It’s the amount that you’re liable to pay to your government for the rental of your rooms. It largely depends on the rules, regulations, and rate in your region, so you will need to do some minor research.
Once you’ve found out how much tax you need to pay, you’ll then need to display it on your listing. That’s because although it’s the host’s job to deal with the tax, it’s normally the guests who cover the charge. In addition, in some regions, Airbnb will collect the money on the host’s behalf, but that’s another thing that our previous post covers.
How is Airbnb income taxed?
We’ve discussed one form of tax that relates to an Airbnb business model. But, as you’ll be generating revenue from renting out your property and driving up your overall income, you’ll also be required to disclose that to your relevant tax authority; some examples are HM Revenue & Customs (UK) and IRS (US), CRA (Canada), but there are many more throughout the world.
Now, income tax is very easy to understand, as it’s just the percentage that you pay for all the amounts deemed as rent. But, there’s much more that you need to consider, as rules vary depending on where you’re situated.
Generally, you’re going to be taxed on a property based on how much you’re actually generating, and many regions even have a threshold where you don’t pay anything unless you earn over that amount. Furthermore, many authorities will actually allow you to deduct expenses from the tax you’re required to pay.
For instance, you could be entitled to pay for advertising, maintenance costs, cleaning or repairs without paying tax on it, but everything must be declared. Ultimately, seek out income tax rates from the authority that is in control in the region where you’re located, because it’s important that you adhere to the rules in your specific area, rather than looking it at it from a generic standpoint.
But, to the answer the question – yes, Airbnb income is taxable.
The post Question Time – Is Airbnb Income Taxable? appeared first on Hosty.