When thinking about the potential profits, make sure you take into account all of the possible expenses that will come your way. Some of the other common losses include:
- Additional insurance
- Cleaning services
- Household items like toilet paper
- New plates and silverware
- Coffee machines
- Utility bills
- Third party services
- Urgent repairs
If possible, start an emergency fund where you can have money ready for those times when the unexpected happen. If you get a call about a leaking pipe in the middle of the night, you’ll have to pay immediately to fix the problem. These urgent problems are also the most expensive since you’re paying a premium for fast assistance at a late hour. Have money saved up, keep receipts for your taxes and insurance, and remember to subtract any losses from your expected profit margins. By doing so, you’ll have a more realistic expectation as to what a profitable year looks like.
Taxes are essential to keep in mind, and you may wish to hire a tax advisor to help in the beginning.
Airbnb may require your taxpayer information to comply with tax reporting and compliance obligations. In the absence of your tax information, in some cases, Airbnb may be required by government tax authorities to withhold taxes at specified default rates.
As a host, you might need to gather local tax and/or Value Added Tax (VAT) from your guests, depending on your location.
If you reside in the European Union, Latin America, China, or South Korea, you may need to evaluate Value Added Tax (VAT) for the services you offer. It is advisable to consult a tax advisor for assistance. Airbnb is mandated to collect VAT on its service fees in various countries, including all EU nations, Albania, Chile, Colombia, Iceland, Mexico, Norway, Saudi Arabia, South Africa, Switzerland, and Uruguay. Additionally, VAT is collected on service fees from all users engaging with Airbnb China.
If you decide to collect tax, make sure guests know the specific amount before booking. In certain areas, Airbnb offers a feature to handle occupancy tax, so hosts shouldn’t separately collect such taxes. If you’ve shared your business tax ID and tourist tax info, you might qualify to directly collect taxes from guests using Airbnb hosting tools.
Taxation varies based on whether you’re renting out your entire property or just a room in your primary residence. Generally, you are required to pay rental income tax on earnings generated from hosting on Airbnb.