Vacationing at an Airbnb and getting a tax deduction on it sounds too good to be true. Well, the IRS definitely doesn't allow you to deduct your personal travel expenses from your federal tax. However, the rules are a little different when traveling is attached to a business purpose. Employees get an allowance or get reimbursed if they have to travel for work. But as a business owner, you do have some additional perks.
If you're planning a workation anytime soon and you're wondering how to turn your Airbnb stay into a tax write-off, here's a quick guide to help you get more clarity.
The first prerequisite to writing off your Airbnb stay is that you're traveling for business. It could be your full-time business or a side hustle. Expenses incurred on account of attending business seminars, trade shows, conventions, and meeting clients can be claimed as deductions. But if you're traveling to look for an opportunity in a new field of business, it’s not eligible for a deduction.
When you club a family vacation with a work trip, you can deduct the Airbnb stay for the days that you spent working towards a business need. For instance, if you go on a 7-day trip and spend 4 days working and 3 days sightseeing, you can deduct the lodging cost for only 4 days. A day is typically considered a business day when you work for more than 4 hours, attend a meeting, or spend more than 4 hours on business-related travel.
Expenses for a single individual
You can get deductions for the accommodation cost of one person. But that doesn't mean your family cannot accompany you. Even if they are not involved in your business, they can stay in the same accommodation as you, and you are eligible to write off the charges.
The IRS states that the expenses cannot be anything luxurious, rather they have to be ordinary and necessary. The deduction is applicable when the person travels away from their tax home (the place from where your business operates) to meet a business requirement. Besides Airbnb charges, you can write off other applicable expenses as well, such as transportation fare, business calls, dry cleaning, etc.
To avoid last-minute rush and confusion during tax season, we recommend organizing receipts. Keep a thorough record of the places you're visiting during your business trip, the Airbnbs or other accommodations you're staying at, and the meals you're paying for during a business meeting. This will help in claiming deductions and filing taxes seamlessly. In case there is an IRS audit, you'll be able to show the receipts to justify the deductions you have claimed. However, make sure these receipts contain expenses you incurred strictly for business purposes only.
Let experts take care of your tax filing
Whether you’re a digital nomad or a business owner, taxation is something you cannot avoid. Claiming the right deductions, calculating taxes, and filing on time are tedious yet essential processes for running your firm successfully. It can take away a significant chunk of your time and energy, so the best practice is to let the professionals handle it.
At Accountants Now, our tax experts are here to make sure you can write off all eligible deductions, reduce your tax liability legally, and take the worry out of taxation. Contact us to get an instant quote.