Airbnb | General guidance on the taxation of rental income
January 2017 v1
Disclaimer
This booklet is intended solely for information purposes and no Airbnb Host or other third party may rely upon it as tax or legal advice or use it for any
other purpose. As such, EY and Airbnb assume no responsibility whatsoever to Airbnb Hosts or other third parties as a result of the use of information
contained herein. This booklet was prepared by EY, and does not necessarily reflect the views of Airbnb. Please refer to the disclaimer on page 1 for
more information. 15
Exception to the passive activity limit:
(a) Exception for rental real estate activities with active participation
If you actively participated in a rental real estate activity, you may be able to deduct up to
$25,000 of loss from the rental activity from your nonpassive income. This special allowance is
an exception to the general rule disallowing passive losses in excess of passive income from
passive activities discussed above.
You are considered as actively participating in a rental real estate activity if you owned at least
10% of the rental property and you made management decisions or arranged for others to
provide services (such as repairs) in a significant and bona fide sense. Management decisions
that may count as active participation include approving new tenants, deciding on rental terms,
approving expenditures, and similar decisions.
The maximum special allowance is:
► $25,000 for single individuals and married individuals filing a joint return for the tax year,
► $12,500 for married individuals who file separate returns for the tax year and lived apart from
their spouses at all times during the tax year, and
► $25,000 for a qualifying estate reduced by the special allowance for which the surviving
spouse qualified.
If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married
filing separately), you can deduct your loss up to the amount specified above. If your MAGI is
more than $100,000 (more than $50,000 if married filing separately), your special allowance
is limited to 50% of the difference between $150,000 ($75,000 if married filing separately)
and your MAGI. Generally, if your MAGI is $150,000 or more ($75,000 or more if you are
married filing separately), there is no special allowance.
Example: You listed a house that you own for rent for 9 months in 2016 for a total of $27,000
and incurred rental expenses of $30,000. Your rental loss in 2016 is $3,000 ($30,000-
$27,000). This rental activity is the only passive activity you had during 2016.
You can deduct rental expense up to your rental income of $27,000. The remaining $3,000 is
suspended and carried forward to future tax years.
If you actively host by setting the price of your listing, setting up house rules, arranging
cleaning and repairing services, deciding which request to book to accept, etc., you may be
able to deduct the remaining $3,000 under the exception, depending on your specific
circumstances, such as, filing status, income level, etc.
(b) Exception for real estate professionals
The passive activity limit does not apply to materially participating real estate professionals. To
be considered as such, you have to satisfy several requirements. For a detailed discussion of
the requirements, see IRS Publication 527 “Residential Rental Property” and 925 “Passive
Activity and At-Risk Rules”.