Tax Lawyer Blog

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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.  

2014 Tax Preparation Notice

Moskowitz LLP

Client Alert from Moskowitz LLP

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2014 Tax Preparation Notice


INDIVIDUAL/ PARTNERSHIP/ S CORPORATION OR CORPORATION Tax Return(s)

We hope that 2014 was a happy, healthy, and prosperous year for you and your family. Enclosed is your annual organizer for your 2014 taxes. It’s that time of year again when you are receiving your annual income and other statements for the purpose of preparing your 2014 individual and/or corporate and/or other entity income tax returns. Both the IRS and the state of California have additional reporting requirements as well. For instance:

Health Insurance:

You will need proof of your insurance. You may receive a governmental form such as Form 1095-A - Health Insurance Marketplace Statement or a certificate from your health insurance company. If you do not, please provide us with a copy of your policy.

We wish to remind you to timely file your 2014 tax returns and pay any taxes or estimates that you owe in a timely manner. Please read this carefully, as it contains important information and deadlines.

If you have questions regarding completeing the Tax Organizer, or would like to make an appointment to meet with one of our tax preparers, please contact one of the firm members below.

Applicable deadlines

1099's are due to the recipient by January 31st and to the IRS by March 2, 2015. If you are required to issue 1099s you must contact us by January 26th, 2015.

Corporate income tax returns: If you are responsible for corporate income tax returns, the filing deadline is March 16, 2015 for calendar year corporations. If you would like for the Firm to prepare your corporation’s 2014 income tax returns, we must receive your completed 2014 tax information by February 1, 2015.

If you elect to submit a filing extension for your CORPORATION (form 1120 or 1120S) please be advised that IRS Form 7004, must be filed with the Internal Revenue Service by March 16, 2015. With respect to your state of California corporate income tax returns, taxpayers automatically have an extension until September 15, 2015 if your return is not filed by March16, 2015. However, as you are aware, the extension of time to file does not extend the time to pay any tax owing; interest and penalties will accrue on any balances owed. If you would like our office to prepare and file an extension for you, we will be happy to do so for an additional fee.

Individual/Partnership tax returns

In order to have sufficient time to prepare your individual (or partnership) 2014 tax returns to be filed by the April 15, 2015 deadline, we must receive your completed 2014 tax organizer and other tax requested information (i.e., W-2’s, 1099 Form(s), etc.) by March 1, 2015.

If you elect to submit a filing extension for your INDIVIDUAL (form 1040) federal tax return, please be advised that an IRS Form 4868, must be filed with the Internal Revenue Service by April 15, 2015. With respect to your state of California individual income tax returns, taxpayers automatically have an extension until October 15, 2015 if your return is not filed by April 15, 2015.

If you elect to submit a filing extension for your PARTNERSHIP (form 1065) federal tax return, please be advised that an IRS Form 7004, must be filed with the Internal Revenue Service, and an extension of 5 months will be granted.

If you would like our office to prepare and file an extension for you, we will be happy to do so for an additional fee.

Avoid any penalties and/or interest that may accrue on outstanding tax liabilities by timely and correctly filing returns and/or extensions and paying the amounts owed to IRS and/or state taxing agencies on a timely basis.

If we receive your individual or partnership tax information after March 15, 2015, you will most likely be on extension. If we receive your corporate tax information after February 15, 2015, you will most likely be on extension.

If we are currently representing you in other tax matters, please also be reminded that timely filing your tax returns and paying your taxes when due may have a significant impact in resolving your case.

If you have any questions, please contact our office.

It is our pleasure to represent you in all of your tax matters, and we look forward to hearing from you soon.

Sincerely,

Stephen M. Moskowitz, Esq.
Senior Partner

Moskowitz LLP

 

Moskowitz LLP, A Tax Law Firm, Disclaimer: Because of the generality of this post, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice from a tax attorney based on particular situations. Prior results do not guarantee a similar outcome. Furthermore, in accordance with Treasury Regulation Circular 230, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purposes of (i) avoiding tax related penalties under the Internal Revenue Code, or (ii.) promoting, marketing, or recommending to another party any tax related matter addressed herein.