Any kind of business involves dealing with big numbers, accounts, cash transactions and taxes. If you are a newcomer to this field, you might find it very challenging to get your accounts on track. Also, it is possible that you may not be aware of tax regulations as well as legality set by your local tax authority regarding Airbnb income. As you might find all this overwhelming, here is a list of tips that will guide you to track your Airbnb income in an efficient manner.
Maintain a separate bank account
One of the best ways to monitor the cash flow related to your Airbnb rental business is by opening a separate bank account for business purposes instead of merging it with your personal one. While some people believe maintaining different bank accounts can prove very tiresome, it is actually much easier than you think. This will give a clearer picture and you can keep track of every payment or transaction. It will also be helpful in cases of taxes and deductions.
File all cash transactions
Make sure that you keep all the invoices, receipts and bills related to your Airbnb income in organized files or as digital folders. Only if you have a valid proof of these payments, you will be eligible for tax deductions. If you think maintaining these records is not that important, you are very wrong. As mentioned, you will not be able to apply for deductions which will ultimately result in a smaller profit margin.
With the advancement of technology, one of the best ways is to employ techniques of automation. By using suitable automation software you don’t have to burden yourself with managing accounts manually. By using automation, you can link Airbnb accounts with your bank account. The software will keep a track of all your transactions and you will not be required to make any entries. You can also get your monthly or yearly financial reports that will be prepared by the software itself. You just have to enter what you need and voila! It will be ready.
Hire a professional for better management of Airbnb Income
If you have multiple properties that are listed on Airbnb and other platforms as well, then it is best to hire a professional accountant to help you tally your Airbnb income and set up a system for maintaining Airbnb income-related processes in an organized way.
It is recommended that you seek professional guidance in the early stages of your business as it will help you run a smooth business avoiding any hassles along the way.
Deductions related to Property Management
Sometimes, your business might be running well, your bookings are in full swing, but your Airbnb income doesn’t seem to measure up. In this case, the problem is that you have overlooked the tax deductions that are applicable to you. Not just you, most hosts are not aware of the tax deductions for rentals. Don’t worry. We have compiled a list of all the tax deductions that you may be eligible for.
Although insurance is provided by Airbnb for all hosts, it is not sufficient and it is best to obtain additional home insurance of your own. These insurance costs can also be deducted. You must have the respective documents handy though.
You can apply for deductions for all expenses that you bear related to the maintenance of your property. Even if you hire a cleaning service, you can deduct it. Similarly, in case of any maintenance issues that were carried out, like fixing pipes or electrics, it can be deducted. So if you get a complaint regarding your property, don’t hesitate to get it fixed.
Nowadays, almost all types of businesses require promotions to survive as the competition has increased; it has become almost inevitable. Promoting your property through advertising and employing marketing tactics can be heavy on your pocket , but, luckily, these costs are tax deductible. So you can easily go ahead with property promotions without worrying about additional charges.
The costs that you bear for utilities like electricity, internet, water, etc are tax-deductible. When you calculate these costs for a year, you will realize that you are saving quite a lot.
Running a vacation rental will obviously require perishable and non-perishable supplies. This will include food and beverage products for guests among others. This deduction is unknown to many hosts and they end up losing a lot in this category.
An added advantage that you get out of maintaining a cleaner Airbnb income record is that you can read your property’s performance with ease. If you find that the amount you spend on your property and the Airbnb income you earn is not in a favorable proportion, then you can take immediate measures to set things right. You can also figure out if there are any unnecessary costs that can be cut. You can also check out Airbnb’s policies related to tax and income in addition to the local legal system. Airbnb property management software can help a lot in sorting most of these problems.