What is the best way to handle tax on Airbnb rental income?

But what if you rent the property for less than 14 days a year? I thought there was some rule about that being tax-free? Does that apply to Airbnb?

You're absolutely right about the 14-day rule! If you rent your property for 14 days or less during the year, you don't have to report the rental income on your tax return. This is sometimes called the "Masters exception" because people in Augusta, GA often rent their homes during the Masters golf tournament. But this exception is very limited and specific. Based on the original post mentioning 7 months of renting, they're well beyond this threshold and would definitely need to report all income and can deduct the proportional expenses.

Does it work with other rental platforms too? I use both Airbnb and VRBO so I need something that can handle multiple income sources.

Sounds interesting but I'm worried about giving access to my financial docs to some random website. How secure is it? Do they store your tax documents or just analyze them?

It definitely works with multiple platforms! I use it for both my Airbnb and VRBO listings, and it consolidates everything nicely so you can see your total rental income and expenses across platforms. They use bank-level encryption for all documents and don't permanently store your sensitive information after analysis. They just extract the relevant tax data and organize it for you. You can also delete your documents from their system at any time. I was hesitant at first too, but their security policies convinced me it was safe.

How does that even work? The IRS phone system is notoriously impossible to navigate. I've literally spent multiple days trying to get through.

Sorry but this sounds like BS. Nobody gets through to the IRS. I've been trying for months. There's no way some service can magically make the IRS pick up the phone when millions of people can't get through.

It basically holds your place in line and calls you when it's about to connect with an agent. It navigates the phone tree for you and does all the waiting so you don't have to sit there listening to hold music for hours. The system works because they've mapped out the entire IRS phone system and optimal calling patterns. They're not doing anything magical - just using technology to handle the waiting part. It worked surprisingly well for me too when I was skeptical at first. The IRS is understaffed, but they do eventually answer calls - Claimyr just makes sure you don't waste hours waiting.

That's what I was thinking must be the case. If they're sending tax forms directly to the IRS, my neighbor must be just ignoring them? That seems like a terrible idea. Do you know if there are any specific deductions for Airbnb that might be what she's talking about instead?

Yes, Airbnb absolutely reports your income to the IRS regardless of what your neighbor thinks. She's either confused or deliberately ignoring her 1099-K, which is a fast track to an audit. There are plenty of legitimate deductions that can reduce your tax burden significantly, which might be what she's confusing with a "loophole." You can deduct cleaning fees, supplies, furniture, appliances (depreciated), utilities, insurance, property management fees, and even a portion of your internet/cable if it's available to guests. You can also deduct mileage for trips to maintain the property. These deductions can substantially reduce your taxable income, but you still have to report ALL the income first.

I switched to FreeTaxUSA after having similar problems with TurboTax. WAY better for rental properties and it handles Schedule E much more intuitively. Plus it's cheaper.

That's not accurate - reinvesting profits doesn't make the income tax-free. You still need to report all income from your rental. The renovations and furniture aren't fully deductible in the year you buy them either - they need to be depreciated over several years (typically 5-7 years for furniture and 27.5 years for home improvements). You can deduct normal operating expenses like cleaning, utilities, and supplies in full for the current year, but capital improvements have to be depreciated according to IRS schedules. You're still taxed on your net income even if you're using that money to improve the property.