Did you rent your house for the Super Bowl?

The Twin Cities’ short-term rental market is particularly robust when large sporting events are in town. Minnesota Airbnb rentals during Super Bowl week are predicted to generate a combined $3.7 million of income. The average Airbnb is around $240 a night, with some people charging up to $1,000 a night for a condo downtown, as well as $2,000-$5,000 a night for a house a couple miles from US Bank stadium. Most of the 5,500 registered hosts are making more money than usual on their short-term rentals, with many trying Airbnb for the first time. This event, and the short-term rental market in general can generate a solid income for many households. Income, however, may be subject to tax.

The taxation of short-term rental income varies wildly depending on the circumstance. Take into account these five points if you rented out your home:

  1. If you live in the unit you are renting, income from the activity can either be completely excluded from tax or it can all be subject to tax with very limited deductions.
  2. The tax rates on which income is taxed can vary greatly.
  3. Rental income is typically subject to tax at ordinary rates but, in certain circumstances, the income can also be subject to self-employment taxes (15.3%) on top of the income tax rates.
  4. At the state and local level, some short term rentals are required to collect and remit sales taxes and hotel occupancy taxes.
  5. The ability to recognize losses on the activity could be forfeited and the income subject to an extra 3.8% surtax for taxpayers in higher tax brackets.

As you can see, there are a lot of tax considerations when engaging in a short-term rental activity. It is best to consult with your Lurie tax advisor so you know the consequences arising out of your particular circumstances.

Brian May, EA

Tax Manager

bmay@luriellp.com

 

 

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