1099-K IRS Tax Filings for Airbnb Hosts

Why read this article?

Airbnb reports higher amounts to the IRS through the 1099-K than hosts actually receive in payouts, causing many hosts to unknowingly pay more in taxes than they owe. Accountants unfamiliar with Airbnb’s 1099-K often miss the key deductions hidden within this form.

This article breaks down how Airbnb’s 1099-K works and what Airbnb reports to the IRS for each host. If you manage or own a property on Airbnb (a “Host”), misunderstanding the 1099-K can cost you big at tax time.

(If you haven’t already, be sure to check out our comprehensive guide to Airbnb Accounting & Bookkeeping.)

About Airbnb’s 1099-K

Each year, Airbnb issues Form 1099-K to the IRS for every host who receives $600 or more in gross revenue. If you receive a 1099-K from Airbnb, you should report the gross amount listed in Box 1a as gross receipts on your Schedule C (or Schedule E, depending on your filing situation) to avoid triggering an IRS review.

From that reported amount, you then subtract the Airbnb-specific deductions, including Airbnb’s service fees, refunds, and adjustments. After that, you subtract all allowable business expenses (such as cleaning, repairs, supplies, and depreciation) to determine your taxable income from your Airbnb listing’s activity.

Airbnb’s 1099-K Reports gross earnings, NOT net

Airbnb charges various fees on each reservation throughout the year, and it’s up to you (the host) to calculate and deduct them. These fees are taken out before your payout ever reaches your bank account, yet they are not subtracted from the gross amount reported on your 1099-K.

This is a standard practice among online payment processors: the 1099-K reports total gross income, not income after fees or deductions. As a result, the gross amount on your 1099-K will always be higher than the amount actually deposited into your bank account.

Namely:

Airbnb Service Fees	Airbnb service fees are not deducted on the 1099-K. For every reservation, Airbnb charges hosts a service fee (from 3% to 15%), and while these fees are removed before your payout reaches your bank account, they are not subtracted from the gross earnings reported on the Airbnb 1099-K.
Refunds	Refunds are not deducted on the Airbnb 1099-K. When hosts issue a refund (whether due to a cancellation, a shortened stay, or a resolution adjustment) Airbnb subtracts the refund amount from the host’s next payout rather than processing a direct withdrawal from the host’s bank account. However, these refunded amounts are not subtracted from the gross earnings reported on the Airbnb 1099-K.

See for yourself

Obtain a copy of Airbnb’s 1099-K by downloading it from your Airbnb account’s Payouts page under Taxpayer info. From there, compare the amount reported to the IRS with your actual earnings by downloading your Airbnb transaction history CSV for the year.. or even better, by summing the total deposits from Airbnb in your bank statements. You’ll notice a sizeable gap between what your bank received and the higher amount reported on Airbnb’s 1099-K, and unfortunately, that difference is not in your favor.

Many hosts are unaware of this discrepancy and simply accept the 1099-K at face value without separating and deducting the associated fees, leaving them overpaying in taxes year after year. This is one of the many reasons having a proper accounting system in place is such a valuable investment. Once you examine the details closely, you’ll arrive at the same finding and will need to close the gap.

Airbnb’s 1099-K: Closing the expense gap

You can resolve this issue a few ways. Now that you’re aware of the gap, when you receive a 1099-K from Airbnb, you can compile a spreadsheet and calculate Airbnb’s service fees and refunds for the year manually using Airbnb’s transaction history. From there, you can declare the fees as direct costs and refunds, and include them as separate deductions for the year (on top of all other deductions). This way assumes you know what you’re doing with your accounting.

The better way? Get an Accountant that specializes in Airbnb businesses. Ryan Gallagher, Owner of Vacation Rental Bookkeeping and a highly respected advisor in the short-term rental industry, says it best…

“A bookkeeper who specializes in your industry can get you set up correctly, will already have ideas to share that will help you earn more money, and will save you from paying huge fees… A great bookkeeper will also use the software which best applies to your business and gives you the right reports.”

Source

The issue regarding Airbnb’s 1099-K discussed in this article is just one example of how hosts can get burned financially.. and it’s far from the only one. We’ll cover additional pitfalls in future articles.

If you’re not ready to hire a full-time accountant, consider at least working with one to set up your bookkeeping system properly. Once the foundation is in place, you can connect Tallybreeze to your bookkeeping software to automatically track revenues and fees from Airbnb, keeping everything organized from day one.

Conclusion

Whether you report your Airbnb income on Schedule C as an individual or through a company, the issue is the same. The amount Airbnb reports on their 1099-K is higher than what you actually receive, and this discrepancy works against you. To avoid overpaying in taxes, you need to identify the total Airbnb service fees and refunds and deduct them from the reported 1099-K amount. If you work with an accountant experienced in the short-term rental industry, they will already know to make these adjustments.