[Question]I’m going on vacation and want to rent out my home on Airbnb. What do I need to know?
[Answer]Renting out your home while you’re away sounds like an easy way to make money (and may even help pay for your vacation). But you need to make sure your rental is legal, you have the right insurance and you’re paying all the taxes due.
Before posting your ad, ask your condo association, homeowners association or co-op board if short-term rentals (often defined as less than 30 consecutive days) are allowed. Then search your local government website for restrictions that may complicate your plans. Your municipality may have a short-term rental office, or you may need to call your city or county to clarify the rules.
Jumping through hoops. You may need to register your unit with the city, pay for a license, submit floor plans, undergo an inspection or notify your neighbors. Some cities also set limits on the number of guests who can occupy your home at once, the maximum number of days you can rent your home each year, or the minimum number of days that you must live in your home each year in order to dabble in short-term rentals.
“There is no blanket regulatory policy that governs short-term rentals,” says Matt Kiessling, vice president of short-term rental policy for the Travel Technology Association. Airbnb summarizes laws for more than 50 localities on its site.
You also want to protect yourself from damage or theft in your home and the potential for liability claims. Discuss your plans with your homeowners insurer and be up front about how often you hope to rent out your home. Increasingly, insurers are paying attention to this kind of activity and working out a solution with clients when possible. Your insurer may be comfortable allowing “incidental” rentals through Airbnb (meaning you still treat your home like a primary residence and only rent it out on occasion each year), or it may sell an add-on that covers short-term rentals, such as Allstate’s HostAdvantage ($50 per year to cover $10,000 of personal property per rental period).
Although Airbnb includes liability and damage protection for its hosts, “I wouldn’t want to rely on Airbnb rebuilding my home if it burned down and we don’t know why,” says Spencer Houldin, president of Ericson Insurance Advisors in Washington Depot, Conn. “I’d rather have my homeowners carrier accept the risk.”
Don’t forget taxes. Keep a log of your rental days, as well as receipts for your expenses. You may need to collect occupancy, sales or lodging taxes for your city, county or state. Airbnb takes care of this in a number of locales. You can find more information about tax rates and links to the relevant authorities in dozens of regions by searching “occupancy taxes” in Airbnb’s “help” section.
You also need to pay income taxes on your rental earnings if you rent out your home for more than 14 days out of the year. Homeowners who rent through Airbnb without providing hotel-like services, such as meals or daily cleaning, will report short-term rental income on Schedule E rather than Schedule C, says Mike D’Avolio, staff program manager at Intuit.
On Schedule E, you can deduct expenses that directly relate to the rental, such as host service fees or bedding only used by your paying guests, as well as a portion of expenses that are attributable to guest use (such as a fresh paint job and utilities). This allocation is based on the number of days you rented your property during the year, so if you rent out your home for 30 days in 2018, you can deduct roughly one-twelfth of shared expenses.
This article provided by NewsEdge.