Airbnb has been a tremendous win-win for many homeowners and travelers. The popular app makes it a breeze for people wanting to rent out space to make a little extra income, while at the same time giving a great deal to those looking for a cheap place to rent. However, unlike a hotel or other traditional property that is used primarily for renting, the rules for deductions are different. Here’s how it works.

What Defines Personal Use

There’s a few rules that determine whether your house is a rental or more for personal use. Ordinarily, any day you rent your home is considered a day it is for rental use, and a day it is considered a rental property. However, if you are at the same time using your house for a residence the day it is rented, then that day would still be considered a personal use day. Further, if any of your family or friends are staying in that house while someone else is renting it, it is still considered a personal use day.

Exceptions include if you are repairing, cleaning or maintaining the home in general while someone is renting it—then that day is still considered a rental day.

So, generally, if you are still living in the house while renting out a room, every day that the room is rented is still considered a personal use day. So for tax purposes you would be allowed certain deductions against the income however, you would be unable to deduct any kind of loss above the income received related to that rental.

If it’s Primarily a Rental You Can Claim Deductions

If, on the other hand you own a property and your personal use days are not exceeding the greater of: 14 days or 10% of your rental days, then the property is deemed a rental. In this situation, you must report your rental income, and you may deduct losses based on your rental activity.

It’s also important to know that if you even use this rental property for just one day of the year for personal use, then you must make sure to divide your rental expenses between personal use days and rental use days. Of course, only the expenses for the rental use days will be deductible.

The Fewer Than 15-Day Tax Exclusion

One interesting loophole you can use to you advantage is the fewer than 15-day tax exclusion. If you have fewer than 15 rental days in a single year, then you don’t have to report your rental income from those days. That’s right – it’s tax-free. Remember, these must be considered rental days, not personal days, so if you plan on using this loophole, act accordingly.

Confused About Rental Rules? Complicated Scenarios Require Professionals

There are many, many different tax scenarios for renting your property using an app like Airbnb. If you are uncertain what you may deduct, or the best way to use deductions available, we can give you more details and answer any questions you might have. PDM’s tax experts can help advise you on the best course of action. Contact us; with our years of technical experience, advanced training, and cutting edge technology, we are your financial partner.