Well-known websites like Airbnb are encouraging some homeowners in Columbus to rent out all or a portion of their houses in order to make money. However, what are the tax implications of this?

Your income, how much of your house you rent out, and how often you make it available will all affect the tax implications of renting out your house. If you want to know how much taxes you are obliged to pay for renting out your home, contact a tax professional to know the tax services in Columbus.

Know the tax implications of renting out a portion of your home on Airbnb.

According to federal tax legislation, rental income is often taxable. However, there is a catch if you rent out a house that you live in and you do so for fewer than 15 days a year. The one exception is that neither rental revenue nor rental expenses are shown on your tax return. This allows a person to temporarily rent out their house without suffering any tax penalties.

Certain expenses, such as eligible mortgage rates, real estate taxes, and casualty losses that you would normally be able to claim as itemized deductions, are still deductible on Schedule A under the standard guidelines if you itemize.

For me to qualify for this exception, how many days must I use the house?

You must keep the house for personal use for more than the larger of 14 days or 10% of the number of days that it is rented to other people at a reasonable rental rate, in addition to renting it for 14 days or less per year. If you are simply renting out a spare room in your house, this will not be an issue. However, you have to record the number of days spent on vacation or in second residences.

This unique exception is not applicable, for example, if you rent your beach house for 13 days and use it for 13 days, as you did not utilize it for 14 days. Therefore, make sure to extend your vacation by at least 15 days if you want to avoid the stress of reporting rental income and costs on your holiday home.

I surpassed the 15-day criterion because I was unable to quit renting out my house. Now what?

For tax purposes, you now begin recording rental revenue and expenses. Rental revenue and costs must be revealed if the house is rented for more than 15 days and is likewise utilized for personal purposes (but not as a residence). Every expense associated with the house must be split between individual and rental use. If there is a loss, it can be limited by the passive activity loss regulations, even though the rental portion of the costs cannot be shown on Schedule E.

What if the real estate is a vacation house instead of my primary residence?

You will continue to record your rental earnings and divide your expenses between personal and rental. We have no way to base the portion on square footage because we are renting the entire house. We count the days. However, if there are days that are not rented or utilized for personal purposes, it gets more challenging to divide costs between rental and personal use. We now have three types of days: days that are rented, days that are personally used, and vacant days.

Are there different regulations for timeshares?

In general, timeshare owners must keep track of their rental revenue and expenses at all times. When determining if you are eligible for the exception that exempts you from reporting rental income or costs, keep in mind that you are not allowed to rent out the house for longer than 15 days. However, even if you own a week or two, the days rented are tallied for the full year. This means that any days that other timeshare unit owners rent out during the week are also included. How are the other owners’ actions known to you? That is the issue. It is nearly difficult to demonstrate that your week-long timeshare is not rented for fewer than 15 days a year.