Are you looking for the best Airbnb Host Tips the internet has to offer? If so, legalization and taxation of an Airbnb listing sure are very important topics to investigate for anyone wanting to rent their home on Airbnb so let me show you how you can figure this out yourself.
My Airbnb Host story is pretty unique.
My house went up for sale to clear my film debts. My realtor told me that I should rent out our home on Airbnb to supplement my income until we would find a buyer. Not knowing what Airbnb was, I opened my profile hoping to make a few bucks before going totally bankrupt.
Since then, I’ve generated over half a million dollars on this website!
Airbnb changed my life.
And it could change yours too.
But getting there was not easy and there are important tips you need to know before listing your home on Airbnb.
I’m not talking about silly tips on how to remove cat hair from your carpet. I’m talking about important legal and taxation information that no one will tell you when you first list your home on this website.
Is Airbnb Legal?
While Airbnb is not considered illegal in itself (it’s only a web platform connecting Hosts and Guests), it might be considered illegal to rent your home for less than 31 days in your area.
Some cities may even prohibit certain types of short-term rentals altogether and if you host on Airbnb without applying for a special permit, your government might even be jumping on you as if you were a criminal.
Jail time, yay!
Fortunately, I’ve never heard of anyone being sent to jail for being an Airbnb Host, probably because many cities do not enforce these laws.
Actually, various governments around the world are starting to legalize Airbnb because of the millions of honest citizens who choose to host on Airbnb, even when it’s considered illegal.
Why is Airbnb Hosting Considered Illegal in Some Cities?
If you live in a big city like New York, the housing crisis of long-term residents versus short-term travelers can be a source of tension. Also, Hotel lobbying with deep pockets can see Airbnb as a threat to their business.
But mostly, many short-term rental laws are simply outdated because they were written in a pre-internet era.
Any law that was written before the year 2000 cannot have foreseen all the life-changing possibilities that the internet is bringing us today.
Many governments have recently chosen to update these laws and Airbnb is starting to be legalized in many cities, including London, Chicago, and San Francisco.
What Happens When Airbnb Gets Legalized?
Mostly, permits & taxes.
Yup, Airbnb collecting taxes for governments contributes to make Airbnb legal.
You have to remember that Airbnb manages all payments for Hosts.
So once the service gets legalized on a territory, Airbnb can start managing all sorts of taxes on all transactions for all Hosts. Hotel Tax, Tourist Tax, Short-term Tax, Sales Tax and so on and so forth.
Legalization is a great thing for all parties involved – Governments, Cities, Hosts and Airbnb – because everyone is making:
Speaking of Money, Have You Heard of My $62,000 Airbnb Tax Bill?
After getting some success with Airbnb, I thought I’d create the AirbnbSecrets course to share some of my best Airbnb Host tips to help other users of this platform.
As an honest Airbnb Host, I’ve never feared promoting AirbnbSecrets publicly because I had always paid my income taxes on my Airbnb revenue.
But on February 23rd, 2015, the Quebec government jumped on me as if I were Pablo Escobar when a Montreal media article published I had generated more than $200,000 on Airbnb.
A few days later, at 8 am in the morning, a municipal and provincial inspector knocked on my door, read my civil rights, and told me that hosting on Airbnb without permits was criminal and that I could go to jail for this. Meanwhile,
My entire Airbnb legalization process lasted for weeks.
Fortunately, my buildings were all located on zoning that allowed short-term rentals and it forced me to get all municipal and provincial permits to operate on Airbnb legally.
But that was just the start.
At the same moment, Revenu Quebec – the Canadian equivalent of IRS – began sending countless letters to get in touch with me. They soon put me through a hotel tax audit that lasted for about 3 months, sending me a $62,000 Airbnb tax bill for being an outspoken Airbnb Host.
But it even got crazier.
Even if I only started hosting on Airbnb in late 2012, they also decided to put me through a second audit to verify my income declarations since 2010.
This audit lasted for 16 months and they asked me to send thousands of expenses receipts, bank statements, credit cards bills proof of revenue, etc., hoping they could find some undeclared Airbnb income to send me another income tax bill.
It was pure Airbnb harassment.
By the end of this second audit, they could not find a single Airbnb dollar that wasn’t declared. They closed the second audit without charging me a penny – after ruining my life and paralyzing my Airbnbsecrets operations for a year and a half.
Still, I had yet to pay the $62,000 Airbnb tax bill.
As of this writing, Airbnb is a $30 Billion company that still has not made an agreement with our government to pay any income or sales taxes on tens of millions of dollars worth of transaction yearly in our entire country.
Our government is therefore holding Airbnb Hosts responsible for paying Airbnb’s applicable taxes.
In Quebec, these taxes represent approximately 19% of all transactions on Airbnb.
Even if I’ve submitted proof that tax collection responsibility belongs to Airbnb and not to Hosts like me, I am still forced to make arrangements with my government to pay a back-tax bill of more than $62,000 for Airbnb’s transactions that were made under my name between 2013 and 2015.
Meanwhile, Uber is the Airbnb of taxis and these taxation rules were applied totally differently for Uber.
In September 2016, Uber got legalized in Quebec and the government has decided to make Uber responsible for paying these taxes, meaning the drivers (the equivalent of Airbnb Hosts), never got harassed for non-payment of these sales taxes.
Actually, our government has now closed a deal with Uber to collect these sales taxes directly on their platform and they are currently suing Uber at the Supreme Court to collect about $20 Million dollars in unpaid back taxes.
So I am currently contesting this tax bill because, just like with Uber, I believe this back tax bill belongs to Airbnb, not me.
That said, even if my airbnbSecrets $200k coming out sent me through hell, this unique Airbnb journey taught me so many lessons about short-term rental legalization and taxation that it transformed me into the best candidate to educate new Airbnb Hosts like you.
Currently, my Airbnb’s listings are all legal and based on the insane process I went through, here are 9 steps you should follow before starting to host on Airbnb to help avoid all that headache.
Airbnb Host Tip #1 – Do Your Airbnb Research
Is it really worth it financially for you to become an Airbnb Host?
It probably is, but maybe it’s not.
So watch this video to find out how to research the Airbnb website to estimate the monthly income that you could make with your home on Airbnb.
Based on your research, you can make a clear decision about becoming an Airbnb Host or not.
Airbnb Host Tip #2 – Call Your City Prior to Become an Airbnb Host
After watching the video, if you discover a huge potential for making money as an Airbnb Host, make sure to call your city to see if your municipal zoning allows short-term rentals in your area.
If so, they will guide you towards the next legal steps to host on Airbnb legally.
On the other hand, your residential zoning might not allow short-term rentals in your area and while doing your Airbnb research, you might have found many people living next to you who are hosting on Airbnb “illegally”.
While talking to the city officials, get information on what are the penalties related to disobeying the short-term rental law.
Is it really enforced?
Has anyone been to court for this?
Google will be your best friend on this; find out if any Airbnb Host has been charged for hosting on Airbnb illegally in your city by looking it up online. This way, you will be able to make a clear decision about becoming a legal – or illegal – Airbnb Host.
Airbnb Host Tip #3 – If You are a Renter, Be Upfront with Your Landlord
Before becoming an Airbnb Host, read your lease to see if there’s any mention of “sublets” or short-term rentals.
If nothing prohibits it, this could play in your favor as a renter.
Then, call or meet with your landlord and be upfront about wanting to become an Airbnb Host. Having an honest conversation will allow to you to discover his or her thoughts about this potential life-changing idea of yours. Also, be clear about what type of hosting you want to do.
Do you want to rent occasionally or full-time?
Do you want to rent one room of your apartment while you live there or do you want to rent the entire apartment full-time without living there at all?
Many landlords will allow renting on Airbnb occasionally but if you intend to transform your apartment into a hotel, your landlord might try to stop you from becoming an Airbnb Host.
That said, if the municipal zoning allows short-term rentals at your address, try to work something out with your landlord. Some Hosts offer to pay a higher rent, while others pay an Airbnb commission to their landlords on all their bookings.
By the way, Airbnb has recently put together a collection of resources to help tenants, landlords, and building owners navigate home sharing laws and work together to create fair policies that benefit the whole community.
So make sure to check their home sharing management solutions here.
If you have any questions or would like advice on how to start the conversation between tenants, managers, and landlords, you can also get in touch with Airbnb at [email protected]
Airbnb Host Tip #4 – If You Live in a Co-ownership Property, Read Your Owners’ Declaration
Many condominium buildings are built on residential zoning and the condo owners’ declaration quite often prevents short-term rentals.
Make sure to get informed about this potential issue because you need to know the rules of your building to make a clear decision about becoming an Airbnb Host.
If short-term rentals are not permitted, you can team up with other co-owners to get a special permission from your building or to work together on getting your owner’s declaration modified to allow short-term rentals in your property.
I’m currently an Airbnb-type consultant for a new Quebec $150 million condo project allowing Airbnb-style rental in the co-ownership agreement.
It’s a first in Canada.
Join the movement.
Airbnb Host Tip #5 – Get Informed about Short-Term & Commercial Property Taxes in your Area
Before you start hosting on Airbnb, talk to a local accountant to educate yourself about short-term taxes collected in your area.
Airbnb collects all payments and bills all clients for Hosts from tax havens and many current tax laws are unclear about who has the responsibility of collecting short-term taxes.
Beware that most tax laws were passed before the creation of the internet and that your government might try to make you responsible for collecting all short-term taxes, even if the responsibility might actually belong to Airbnb.
Click this link to verify if Airbnb is collecting and remitting taxes on behalf of the host in your location.
By the way, once you legalize your Airbnb, your city might even consider your Airbnb property as a business and start taxing your entire building commercially.
There is so much to research and you need to be informed.
Airbnb Host Tip #6 – Call Your Home Insurer Before Getting Started on Airbnb
Every Airbnb booking worldwide come with the $1 Million Host Guarantee but it should not be considered a replacement or stand-in for homeowners’ or renters’ insurance.
And depending on where you live, some Airbnb bookings might also come with a $1 Million USD Host Protection Insurance program, which currently provides primary coverage for Airbnb hosts and landlords, in over 15 countries.
That said, some insurers could revoke your home insurance upon learning that you became an Airbnb Host; and it’s not something you want to learn the day your Guests put your home on fire while making chocolate fondue in your bed.
So make sure to discuss your liability coverage with your insurance provider before starting to host on Airbnb.
Beware, as you might even have to switch home insurers because some of them do not cover any sort of short-term rental at all. If your are a renter or a co-property owner, being an Airbnb Host might even affect the insurance pricing on the whole building.
Airbnb-type home insurance is still a new market for insurers and since they do not have much data on it, short-term insurance can be hard to find. Shop around and research on this prior to getting started as an Airbnb Host.
Airbnb Host Tip #7 – Discover the Airbnb Sublets
If your city ever threatens to shut down your “illegal” Airbnb listing or if you are not at ease with operating short-term – legally or illegally – I have to let you know that most cities and condominium-type buildings allow renting your home on Airbnb for more than 31 days legally.
Airbnb long-term rentals are usually considered legal and don’t require any sort of special permit.
Also, renting your home month-to-month on Airbnb is usually not a problem with insurers and it’s often not submitted to any sort of short-term rental taxes at all.
Sounds like a dream?
If you want to learn how to rent your home long-term on Airbnb, make sure to read my Airbnb Sublets blog post.
Airbnb Host Tip # 8 – Declare All of Your Airbnb Revenue and Expenses
Airbnb isn’t free money.
Whether your rent short-term or long-term, Airbnb Hosts are micro-entrepreneurs generating an income.
As soon as you start to make money on Airbnb, talk to your local accountant and make sure to declare all of your Airbnb revenue and expenses.
Trust me, being an honest citizen will reward you.
Declaring my Airbnb income sure saved my life when I got audited as an Airbnb Host.
Airbnb Host Tip #9 – If You Want More Airbnb Host Tips, Get my Free Email Course
As you can see, Airbnb has a steep learning curve and it will cost you lots of time and money to try to learn everything on your own. I currently offer a lot of free Airbnb Host tips via email to empower all levels of Airbnb Hosts. There’s so much more to know and there’s so much we can get into on the tactics.
So I’ve created this free email course. It’s totally free and you just need to enter your email below to sign up.
What kind of tips are you looking for as an Airbnb Host?