Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

Airbnb Taxation

In only 10 years, Airbnb has developed into a $31 billion industry with offices worldwide. To date, more than 100 million guests have shunned expensive hotels during their travels and instead choose the online booking service to rent other people’s homes, apartments and spare rooms.

Although there have been some reported thefts, property destruction and sexual assaults by hosts and guests (as well as discrimination claims, numerous lawsuits with cities and management companies, and some hefty fines in some cities for violating local short-term rental laws), the company is continuing to gain popularity and is making home-renting a mainstream activity. There are an estimated 640,000 hosts currently earning extra cash through this service, with roughly 2.3 million current listings.

Airbnb rental income is taxable

Airbnb receipts are taxable much like all other rental property income. U.S. taxpayers must report and pay taxes on their Airbnb rents, which includes not only rental payments, but also cancellation fees, utilities, meals and cleaning services paid for by guests.

Note that income received for renting out your personal residence for less than 15 days during the tax year is not considered taxable rental income.

Allowable deductions

Airbnb hosts are permitted to deduct many expenses connected with their rentals. Following are some of the permitted deductions:

  • Airbnb service fees
  • Other advertising fees and fees paid to collect rent
  • Guest refunds made following a cancellation or reservation change
  • "Airbnb Open" convention fees
  • Other educational programs and conferences on property management
  • Property management fees (legal, real estate, and accounting)
  • Homeowner’s association fees
  • Property maintenance and repairs
  • Property taxes and insurance
  • Rents paid by tenant hosts to property owners
  • Mortgage interest, and amortization of points paid to acquire the mortgage
  • Utilities (electrical, gas, internet, television, garbage collection, etc.)
  • Cleaning services and supplies
  • "Ordinary and necessary" travel expenses
  • For property owners, depreciation on the basis (purchase price, including fees and costs of acquiring the property) and improvements made to the property

Note that expenses can only be deducted for the period (and space) in which the property has been used for rental purposes – if the property is rented for only part of the year, and/or if only a portion of the property (e.g., just a room) is being rented out, expenses must be prorated by the time and/or square footage of the rental period.

Local occupancy tax

Occupancy tax (also known as hotel tax, lodging tax, room tax, sales tax, or tourist tax), is a state or county tax on the rent of rooms. Where required, it is generally paid for by the guest but the host must deliver the funds to the tax authorities. In some locations, including San Francisco, Airbnb handles the collection and remittance of the tax on behalf of the host.

California county occupancy taxes range from 9.5% to 14% of the listing price, including any cleaning fees for stays of 30 nights or less.

San Francisco full service tax firm

The tax lawyers and accountants at Moskowitz, LLP understand the intricacies of real estate and taxation. For tax preparation assistance, if you are being audited, or if you require other legal tax assistance, call our San Francisco office at (415) 394-7200.  

Estate Planning: It’s Not Just About Your Money and Your Stuff

Gene Roddenberry, the creator of Star Trek, left provisions in his Last Will and Testament to have his cremated ashes scattered by a space satellite orbiting the Earth. His wishes were carried out in 1997 and his ashes were taken off the planet along with the remains of a space physicist, a rocket scientist, and those of psychedelic guru Timothy Leary.

In previous posts we discussed the importance of planning not only for the distribution of your assets after you pass away, but also designating an individual to manage your assets if you become incapacitated. In this post, we will touch upon a few other highly personal decisions that are part of every estate plan.

Instructions for medical care during incapacity

An Advance Health Care Directive (AHCD) contains provisions that in the past were part of two separate documents: The Durable Power of Attorney for Health Care (also known as a healthcare proxy) and the Living Will. Advance Health Care Directives are far more detailed, however, setting forth a person’s instructions on a wide variety of important medical decisions, including:

  • Do Not Resuscitate (DNR) orders
  • The choice to administer or withhold artificial nutrition and hydration at the end of life
  • Whether or not medications should be administered and/or surgeries performed to prolong life in the event of a terminal illness

The choice to have home care or to be moved to a residential facility may also be designated in the AHCD and other estate planning documents. An AHCD may also explain religious-based decisions such as a refusal to accept blood transfusions and other treatments.

Disposition of your remains

A Last Will and Testament usually states whether you prefer burial, cremation or an alternative disposition of your remains. Your Advance Health Care Directive can be more specific:

  • While there are some instances where an autopsy would need to be performed whether or not authorized (e.g., as part of a murder investigation), you can specify whether or not you would like to have it done in any event to determine cause of death, or under what circumstances.
  • Your AHCD can authorize your health care agent to donate any of your organs, tissues or parts – you can specify whether you wish for your donation to be for transplant, therapy, research and/or educational purposes.
  • You can also donate your whole body to science, but note that medical and scientific institutions generally require that you go through an advance screening and authorization process.
  • A simple or elaborate burial can be requested, or cremation can be designated (and whether you prefer to have your ashes buried, kept in an urn, or scattered).

Guardians for minor children and other dependents

No one could do a better job raising your minor children that you can, but if you (and/or your spouse or partner) can no longer do it, someone else will. The care of other dependents, such as elderly or disabled relatives should also be considered. Make sure that you designate responsible individuals in your Last Will and Testament.

Comprehensive estate planning services in San Francisco

Note that having cremated remains taken into space is rather costly, but there are many other meaningful options available for your loved ones to carry out. Contact the California estate planning attorneys at Moskowitz, LLP for assistance in designing an estate plan that not only protects your assets and investments, but that also ensures that your personal and spiritual preferences are followed.