Do you have a spare room in your house that you’d like to rent out? Maybe you’re thinking of renting it out for the Super Bowl. Or maybe you are thinking about renting out your entire home and taking off for an extended vacation. Or perhaps you have a vacation cottage you’d like to rent out when you aren’t using it.
There’s lots you’ll need to consider when you rent out your home or portions of it, including the tax consequences. Here are seven tips you need to know whether renting your home long term or on Airbnb.
- It’s perfectly legal to rent out your home and not report the income. Wait, what?!? Did I read that right? No, really – here’s the rule: rent out your home (or some portion of it) for fewer than 15 days of the year, and you can skip reporting it on your tax return and simply pocket the cash.
- On the flip side, if you don’t report the rental income, then you can’t deduct the rental expenses. Sure, you can claim the mortgage interest and property taxes related to your personal use as itemized deductions, but you can’t claim anything else, such as cleaning, maintenance, repairs, insurance, or homeowner association fees like you would if you claimed a rental property.
- If you have a home that you use personally fewer than 14 days a year, and you rent it out the rest of the time, you can consider it to be a rental for the entire year.
- If your home is considered a rental for the year, that means your expenses for the home related to the rental activity are tax deductible – insurance, maintenance and cleaning, repairs, depreciation, mortgage interest, property taxes – the whole shebang. But you must allocate those expenses between the time you rented the property and the time you used it personally. If the expenses related to your rental activities exceed the rental income, the resulting loss may be offset against your other income, subject to certain limitations.
- If you rent out your home for more than 14 days a year and also use the home personally for more than 14 days a year (or 10% of the rental days), then it is considered to be your residence and you can deduct the related rental expenses to the extent that you have rental income, but no rental loss is tax deductible. When these rules apply to the rental of a spare room, each rental day will count as both a rental day and a personal day.
- If you let your relatives use the home, those are considered personal use days for you, unless your family member pays fair market rent and it is their principal residence.
- You don’t need to know these rules about renting your home on Airbnb or long term. TurboTax Premier will ask simple questions about your rental activities and give you the tax deductions and credits you’re eligible for. If you have questions, you can connect live via one-way video to a TurboTax Live Premier CPA or Enrolled Agent with an average 15 years-experience to get your tax questions answered. TurboTax Live Premier CPAs and Enrolled Agents are available in English and Spanish and can also review, sign, and file your taxes.