I rent my home and my landlord doesn't mind that I occasionally let an Airbnb guest stay in my apartment. Are there any tax deductions available to me in this situation?
Assuming your landlord has clearly approved this arrangement (especially important if your lease prohibits subleases without your landlord's approval), there may be tax benefits of renting out your home. Here's how it works.
When you sub-lease your apartment you become a landlord in your own right and are entitled to deduct the expenses you incur to do so as long as they are ordinary, necessary, and reasonable in amount. This includes:
- fees you have to pay to list your apartment on the Airbnb website
- any expenses you incur to photograph your apartment to create a good listing for Airbnb
- the cost of any other marketing or advertising you do for your rental
- the cost of any credit reports you obtain in order to screen potential guests
- cleaning fees you pay to have the apartment professionally cleaned before and after your guests leave
- the cost of extra insurance you purchase because you’re hosting guests in your apartment
- any items you purchase for your guests’ use such as linens, sheets, soaps, shampoo, and other supplies
- the cost of purchasing a lockbox or having duplicate keys made to your apartment
- if you receive payment through PayPal or a similar online payment service, the fees the service charges
- if you pick up your guests at the airport for free, you can deduct your mileage expenses
- the cost of any repairs you make to your apartment due to its use by your guests, and
- the cost of storing your belongings while guests are staying in your apartment.
The cost of items used by both your and your guests—such as utilities, Internet access, and cable TV--may be partially deductible. The amount you can deduct depends on the amount of time the item is used by your guests. For example, if you host guests for 30 nights a year, you’ll be able to deduct 8% of the annual cost of your utilities (garbage, electricity, water, gas), cable TV, and Internet service. (30 is 8% of 365 days.)
If you purchase new interior furnishings such as a bed, couch, or chairs, the cost is also a deductible expense. The amount you can deduct again depends on the percentage of item you rent your apartment. The cost of furniture and similar personal property must be depreciated—deducted a portion at a time—over five years.
It’s very important to keep good records of all your deductible expenses. This includes receipts, credit card statements, cancelled checks, and similar records. Absent such records, the IRS may disallow all or part of your deduction in the event of an audit. By far, the main reason taxpayers lose deductions when they are audited is lack of adequate records.
For more on the subject, see the Nolo article Tax Issues When Renting Your Home on Airbnb or VRBO.