Co-hosting question

[Stella480]

I'm looking to AirBnB the the top floor of my property while I continue living in the bottom floor. However, since I don't want to handle the logistics and actual hosting, my son is going to become a co-host and we will share the income from AirBnB. For context, he cannot just be the primary host himself because we live in an area that requires the primary host to also be living in the home. I had a couple questions for this set-up:

1. If I put to split payout between mine and his bank accounts, will he get a 1099 at end of year? If not, how does he report the income from AirBnB?
2. Given he's going to do all work and pay for expenses (cleaning, furnishing, cleaning supplies, etc.), will he be able to do those as expense write-offs for tax purposes?

[Lorna170]

@Stella480   If income is sent directly to his bank as a co-host, then he should receive a 1099.  If he does not, and the 1099 comes to you as an owner, then you would have to declare his portion of the proceeds as the Management fee on your schedule E.  Likewise, he would have to declare his portion of the income on his taxes, BUT, if he is the one shouldering the expenses, YES, he would be able to deduct them on the schedule E.  If this is too confusing, consult with a tax accountant to get your questions answered.  I am not an accountant, I have just been handling rental properties for many many years.

[Sarah977]

@Stella480  You could also just add your son to your account. So you would have a joint account as primary hosts. Many hosts do this with their spouse or grown child, or even a friend they share the hosting with. Then you could just work out the payment logistics between yourselves.

[Helen3]

To add to the useful advice above,  just to let you know co-hosts normally get about 20 - 25% commission. @Stella480 

Cleaning fee can be charged on the listing in addition to the listing fee.

The main host has the majority share as they cover the mortgage, utilities, decoration, furniture, crockery, cleaning materials, bed linens, towels, local taxes etc.

@Lorna170 

[Lisa723]

@Stella480  @Lorna170 Airbnb only sends 1099s to US hosts who earn over $20,000 with 200+ transactions.

https://www.airbnb.com/help/article/414/should-i-expect-to-receive-a-tax-form-from-airbnb

[Stella480]

Thank you so much for the responses here! @Lisa723 is the $20,000 based off the amount that is paid to our bank accounts?

[Lisa723]

@Stella480 I don't know for certain, but my guess would be that it's the total taxable amount, which includes the amount you are paid plus Airbnb's host service fee (which is then a deductible business expense). I've never had 200+ transactions in a year so never received one. Maybe @Lorna170 knows from experience.

[Lorna170]

@Stella480   You have to have earned more than $20K (the totals paid by each guest to both you and the OTA, including taxes)  AND have had 200 transactions in order to receive a 1099.  I have never gotten one from any OTA, and I have been doing this with several properties for 15+ years. My properties exceed the earnings portion, but not the number of transactions portion.  I keep a simple spreadsheet of rentals; when, what I got paid, what they paid to the OTA and all expenses incurred (utilities, supplies, repairs, taxes, etc.).  I do not reply on any reports from an OTA for this information.

[Stella480]

Thank you so much to both of you!

@Lorna170 so you keep track of income yourself and report that at end of yr and also keep track of expenses incurred for deductions? Also, in regards to doing co-hosting with several properties at one time, did you form a company to keep income and expenses in one place and have a contract with your company and the property owners or are you managing these properties as an individual and just have a contract/agreement with yourself and property owners? My son is thinking about expanding to help others in the future if the opportunity arises so he's wondering of the best set-up to manage multiple property owners' homes.

[Lorna170]

@Stella480   In response to your question, yes, I keep track of the income myself and enter it along with all expenses incurred on my Schedule E.  I own all of the properties that I rent, I do not co-host.  If I were to manage properties for other owners, I would definitely have a written agreement with the property owners outlining the percentage income I would receive and how expenses would be handled.  Your son should speak to a tax accountant about how to set up as a business or if the income should be a passthrough on his taxes.  An attorney would be helpful in devising a rental management contract that would be valid in your state. Good luck!