Cleaning Fees and social security taxes in the US

Giovanna251
Level 2
American Fork, UT

Cleaning Fees and social security taxes in the US

Question: If I charge cleaning fees and I do the cleaning by myself, is that considered self employment and do I need to pay self employment social security taxes? Is there a way to avoid it? Should I not charge cleaning fees and embed it in the price to avoid it or are they expecting us to pay social security taxes anyway???

7 Replies 7
Howard42
Level 5
Hilliard, OH

I suggest you could use some tax advice.  All money you take in regardless of how you categorize it is income.  If you actually pay someone to clean you can deduct the expenses you actually pay to get towards your net income.  If you clean it yourself the gross money you take in is income regardless that you called it a cleaning fee. 

 

Unless you are actually running a rental company, there should be no social security tax payable on rental income. 

 

Hope that helps, but really get some tax advice.

Unfortunately tax advice is contradictory when it comes to Airbnb. All agree that is income, even the cleaning fee, but some say that since you are working should pay social security and others say that is not necessary. I am okay about paying income taxes but I am not too happy to have to pay social security taxes, it does not make much sense to me. Any other comment?

Keep in mind I am not giving you any legal advice or direct tax advice, just my opinion.  First read the IRS guidelines they are very helpful.  Second, social security is payable on your self employment income or that of your employees, it is not payable on rental income.  You will have to determine that for yourself.

Thank you Howard, perhaps another question may help. When Airbnb inform the IRS of our income with them, do they specify the details of that income? Do they say for example, 3,000 was for rent and 400 for cleaning, or do they give only a total number, like 3,400? I know that they only inform the IRS for income above of 20,000 a year, but the principle applies also for smaller amounts, when trying to make this decision. I am saying this because truly the cleaning fee are more of a pric4 strategy that a real cost of cleaning, and the cleaning fee, includes not just labor but washing expenses etc, so from my point of view everything should just be rental income, but it could change if Airbnb send the information as rental income separated from cleaning fees. I think this could be easily responded by AIrbnb or someone who had income above 20,000

My understanding is that it's not about whether the cleaning fee is considered self employment or not. It's about whether all of your income from AirBnB, regardless of source, is considered self employment. If you provide significant services, such as cleaning, then you are running a hotel rather than a rental. If it's a hotel, all of your income from AirBnB is taxed as self employment income. If it's a rental, it's not. 

 

The part I'm unclear on is what is meant by significant services and whether the cleaning is while guests are there (like a hotel does) or between guests (like a rental does).  It's also not clear whether it matters if you do the cleaning yourself or if you pay someone else to do it. 

Unless they stay 30+ days it's not passive income and you have to pay self employed tax no matter how you categorize it 

Howard42
Level 5
Hilliard, OH

@Giovanna251

 

I believe that Airbnb would just send a 1099 to the irs of the gross amount they paid you, no classifications, and you would get a copy.  It is up to you to prepare and file your tax returns, airbnb would not delineate how you categorize your payments.