If you’ve ever considered ways to generate some supplemental income, you may have pondered the possibility of renting your home on Airbnb.
The company started in 2007 when its two co-founders advertised a night on an air mattress and breakfast in the morning (“Air Bed & Breakfast”) to attendees of a design conference in San Francisco. Now, the company is worth more than $30 billion.
If you’re paying a mortgage for our outright own a single-family home, you should be fine renting it out. If you’re paying for a condo, apartment or town home, there may be some occupancy rules that prohibit such transactions. It’s up to you to do your homework so that you don’t run afoul of the law.
In many cases, local authorities have turned against Airbnb. Some municipalities have banned people from renting out their homes.
Also, it’s a good idea to find out what other homes in your area are renting for. This requires not only browsing similar listings on Airbnb but a general knowledge of local real estate prices. You’ll also want to check what effect Airbnbing your home will have on your insurance premium
When it comes to renting your space, many first-timers don’t know about the 14-day rule allowed by the IRS
. This provision, sometimes called the “Master’s exception,” named after the Master’s golf tournament in Augusta, Georgia, means you don’t have to pay tax on the income you earn from renting out your home. The key is that the renters can’t stay longer than 14 days a year and you must live there at least 14 days of the year.
No matter how much money you spend on sprucing up, cleaning and overall improving your dwelling, keep good records. Come tax time, you’ll want to be able to document every expense that’s deductible.
Once you feel comfortable about having someone stay in your home, it’s time to find some guests! The first thing you want to do is take photos of your home so that they will show well on the Airbnb site and app.
Ready to make money renting your home? Go to Airbnb.com, log in and list your home
. When you do, you may get a few questions from interested parties. Make sure you answer in a timely fashion. They’re probably gauging several places at once, and being the first one to get back to them may make the difference between $$$ in your pocket or not.
If your abode stays on the site awhile without any takers, that’s OK. Many hosts don’t get any guests until it’s vacation season or a really large event takes place in their town. But once you get some inquiries, that’s your cue to inquire a little yourself.
If someone hits you up about renting your home, you can approve or deny the request. But before you make your decision, it’s good to know why they want to rent your home. Read any reviews on the prospective guest’s previous Airbnb stays so that you can make an informed decision.
In many cases, individuals, friends or families may be on vacation and looking to explore a new city. In other cases, you may be able to surmise that they’re planning on throwing a huge party — one that could get them and you in huge trouble!
Once you decide to accept the guest, the next order of business is making sure your home is safe and clean.
While many hosts may never see or meet their guests, you can really score some points for hospitality if you make time to greet your visitors and perhaps answer their questions.
Financial blogger Paula Pant, who wrote for Clark.com about her experience renting her place on Airbnb, said she viewed the transaction as providing a service.
“As an AirBnB host
, I see my role as that of a hotel concierge,” Pant wrote
. “I offer complimentary bottles of water, give directions and offer restaurant suggestions. I supply my guests with an abundance of fresh, fluffy bath towels, matching plates and mugs, wine glasses and a few coffee table books.” Again, keep good records of these expenses for when tax time rolls around.
The Internal Revenue Service allows you to deduct normal supplies you buy to keep your Airbnb business going. That means you can get your money back for things like light bulbs, paper towels and cloth towels. If you provide food in the pantry for your guests or an expensive bottle of wine, it’s all deductible as part of your rental.
Airbnb and other homesharing companies must withhold 28% (your specific tax rate may be lower) of your rental income if you don’t provide them with a W-9 form.
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