Question 1

Do I report AirBnB income on Schedule C or Schedule E?

Accepted Answer

Most AirBnB hosts report rental income on Schedule E (Supplemental Income and Loss). Schedule C is for businesses, and short-term rentals are generally treated as passive rental activity unless you provide "substantial services" to guests (such as daily maid service, meals, or concierge). If you simply provide the space, linens, and basic amenities, Schedule E is the correct form. This distinction matters because Schedule E income is not subject to self-employment tax (15.3%).

Question 2

What is the 14-day rule?

Accepted Answer

Under IRC Section 280A(g), if you rent your property for fewer than 15 days per year and your personal use exceeds the rental period, the rental income is completely tax-free. You do not need to report it on your tax return. However, you also cannot deduct any rental expenses. This "14-day rule" or "Masters exemption" is one of the few true tax-free income opportunities in the tax code.

Question 3

What is TOT and do I need to collect it?

Accepted Answer

TOT stands for Transient Occupancy Tax, a local tax on short-term stays (typically under 30 days). In Los Angeles, the TOT rate is 14%. While AirBnB collects and remits TOT automatically in many jurisdictions, hosts are ultimately responsible for ensuring compliance. In some LA neighborhoods and surrounding cities, you may still need to register with the city, file periodic returns, and verify that the correct amount is being collected.

Question 4

Can I deduct my mortgage interest?

Accepted Answer

Yes, but only the portion allocable to rental use. If you rent your home for 200 nights and use it personally for 165 nights, approximately 55% of your mortgage interest is deductible as a rental expense on Schedule E. The remaining personal-use portion may still be deductible on Schedule A as an itemized deduction (subject to the $750,000 mortgage limit). Proper allocation between rental and personal use is critical.

Question 5

What about depreciation?

Accepted Answer

Residential rental property is depreciated over 27.5 years using the straight-line method. You depreciate the building value (not the land, typically 80% of purchase price) prorated by your rental-use percentage. For a $650,000 property, the annual depreciation could be approximately $18,900 at 100% rental use. Depreciation is a powerful "paper deduction" that reduces taxable income without costing you any cash out of pocket.

Question 6

Do I need a permit to run an AirBnB in LA?

Accepted Answer

Yes. The City of Los Angeles requires a Home Sharing Registration through the Department of City Planning. You must register your property, pay the registration fee, display your registration number on your listing, and comply with the 120-day annual cap (unless you have an Extended Home Sharing permit). Operating without a permit can result in fines up to $2,000 per violation. You also need a current Business Tax Registration Certificate (BTRC) from the Office of Finance.

AirBnB & Short-Term Rental Tax Services

AirBnB Tax Obligations for LA Hosts

Key Benefit: No Self-Employment Tax

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What's Included

Schedule E Preparation

Depreciation Calculation

TOT Compliance (LA 14%)

Expense Documentation Review

14-Day Rule Analysis

City Permit Guidance

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AirBnB Rental Income & Expense Builder

Step 1: Property & Income

Step 2: Expenses

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Related Services

Individual Tax Returns: $450

Bookkeeping: $350/month

Cost Segregation Studies

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