7 Simplified Tax Tips For Vacation Rental Owners

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Never miss a deductable again!

Even though you know it comes around every year, tax season always seems to have a way of creeping up on you. Along with heightened travel and tourism, tax time is a particularly busy time for hosts. That’s why we want to help you stay prepared so that prepping and filing taxes doesn’t catch you off guard and potentially cost you thousands of dollars. 

Here are 7 simplified tax tips for vacation rental owners that will save you money, time, and headaches.

#1 Double-Check Tax Laws and Regulations

Tax tips for vacation rental owners can only be applied efficiently if you’re up to date on local and federal tax laws and regulations. Something is always changing. It was only recently that personal property, like furniture and appliances used for short-term rental homes, could be deducted (100% opposed to 50%). Don’t miss out on money-saving opportunities like these just because you forget to review updated regulations.

#2 Pre-Tax Tracking

Making your life as easy as possible during tax season begins long before it’s due. Efficient short-term rental bookkeeping will be critical to filing vacation rental tax correctly the first time. Investing in a multi-platform automation system designed for vacation rental hosts and their businesses makes transferring critical information easy and allows you to accurately claim as many deductions possible.

#3 Use the Correct Forms (Schedule E or C)

One of the most commonly requested tax tips for vacation rental owners is which form is to be filled out. For most vacation rental property owners, you’ll use 2019 Form 1040 Schedule E or Schedule C.

Use schedule E if :

  • Your rental property earns supplementary income but not enough that you’re considered self-employed
  • You do not manage the property as your primary business activity

Use Schedule C if:

  • You provide substantial services dedicated to your guest’s experience (significant expenses)
  • Do not use if you are considered a self-employed property manager

Navigating IRS forms can be confusing. Review the IRS Topic 415 for further form descriptions.

#4 Short Term Rental Taxes: “Ordinary and Necessary” Business Expenses

Like other businesses, Tax Tips for vacation rental owners would be incomplete without mentioning a valuable deductible like ordinary and necessary business expenses. These deductibles include:

  • Silverware
  • Toilettires
  • Food
  • Wine
  • Decor
  • Netflix
  • Anything added to the rental property to improve the guest experience.

Be sure to maintain accurate and strict records of purchase receipts.

Speaking of necessary– do you charge your guests a deposit for a short term rental? Discover how you can protect your business and your assets with these 6 Security Deposit Tips!

#5 The 14-Day Rule

24-hours can be the difference between you paying tons of taxes and not paying any at all. The 14-day rule states that you do not have to pay taxes on the income you earn through the rental property if you use the property yourself for more than 14 days out of the year and you rent out the property for less than 14 days of the year. So, if you had a slow year or vacationed at your rental property–you’re exempt! But, both have to occur in the same year.

#6 Short Term Rental Property Repairs vs. Improvements

Deductions are perhaps the more exciting tax tips for vacation rental owners. When it comes to claiming yours, be sure to get this one right. Did you replace a degraded roof and refinish a wood floor this year? Only one of these can be immediately deducted on your taxes, in this case, it’s the roof replacement. Here’s how to differentiate and maximize your deductions.

A repair is necessary maintenance and restores an item to its previous condition, making the property habitable. Therefore, this expense can be deducted in the year it was completed. An improvement like installing a security system or renovating a kitchen adds value but that value depreciates so it must be deducted on a set depreciation schedule.

#7 Common Deductions Often Forgotten

Repairs and improvements are obvious deductibles. It’s easier to remember fixing a patio this year than calculating your travel time to the property. This and others are often forgotten but can significantly add to your tax return or slice fees in half. Here are common deductions worth remembering.

  • Home offices related expenses
  • Property taxes
  • Interest paid on credit cards or loans that supplemented the rental property
  • Annual Mortgage interest 
  • Insurance costs for the rental property
  • Additional service and hosting fees

Tax deductions for short term rental may seem insignificant at first, but they can really add up! If you operate from a platform like Airbnb, checkout additional Airbnb-specific tax tips to review.

Conclusion

Tax season should no longer be something you dread. If you’ve been doing accurate tracking of your expenses, implementing these tips will be a breeze. Happy filing!

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