If you're an Airbnb (NASDAQ: ABNB) host, you may have noticed taxes being withheld from your payout. These are not occupancy taxes but actual tax deductions from your payout. Whether you were expecting a tax withholding or not, understanding the types of taxes being withheld from your payout will help you prepare for the May 17 filing deadline. Let's explore some of the tax withholdings you may see on your next Airbnb payout.
As an Airbnb host, you are required to submit IRS Form W-9, Request for Taxpayer Identification Number and Certification. In general, you have 30 days to submit Form W-9. If you fail to submit this form, you'll be subject to backup withholding. If you're subject to backup withholding, the IRS requires Airbnb to automatically withhold 24% -- the current backup withholding (BWH) tax rate -- from your payout. If you're currently subject to backup withholding, you should contact your tax advisor immediately to discuss ways to remedy this problem.
In addition to the automatic backup withholding, Airbnb is also required to automatically withhold taxes from foreign persons.
In general, unless a treaty provision applies (claimed on IRS Form W-8 BEN), if you're a foreign person with a U.S. listing, Airbnb is required to automatically withhold a 30% withholding tax from your payout. The tax is withheld at the time your income is realized through Airbnb's payment portal, and the remaining income will be paid out to you based on Airbnb's payment schedule. If you're subject to this withholding, you should expect to receive IRS Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. The income and withholding information provided on Form 1042-S will aid you in the preparation of your nonresident income tax return.
The Millionacres bottom line
If you're an Airbnb host, you may find yourself subject to automatic withholding. Whether you're subject to the withholding because you failed to file IRS Form W-9 or because you're a foreign person who pays withholding tax, learning what taxes are being withheld is key to understanding what tax forms you may receive from Airbnb and to developing a financial plan. Developing a financial plan and working with your tax advisor can help you absorb the tax payments you're required to make.