When Sharing the Comforts of Your Home for Profit, Don’t Forget To Share With The IRS
A new trend is sweeping the country creating extra income for many homeowners. If you have an extra room or a guest cottage right here in Fairhope, near the racetracks in Talladega, the sights in Mobile or near the Gulf coast beaches, you can rent them out for a few nights and visitors to the area can get a feel for living like a local instead of a tourist. The rates are typically much lower than the local hotel or resort.
While this “sharing economy” has been trending for several years, the rewards may be great until it’s time to file your taxes. I’m all for people who want to make extra money, however be sure your little love nest on the coast doesn’t turn tax time into a hornet’s nest.
According to CBSNews.com, companies like Airbnb, HomeAway, VRBO and others “typically send you a form 1099- MISC, which means they also let the IRS know the total amount of rental income you received through their service.”
So don’t forget to declare your rental income when filing your taxes or that could generate a red flag and a possible audit. There are many other aspects worth knowing for tax purposes when you rent all or part of your residence.
As cbsnews.com reports, “You need to become familiar with a new form you’ll be required to file with your tax return: Schedule E – Supplemental Income and Loss. You’ll also need to know the rules for reporting rental income and deducting rental-related expenses, which are included in IRS Publication 527, Residential Rental Property.” That’s right, you will also be able to declare expenses on your rental, so keep good records and the sharing economy could prove to be worth it – even at tax time.