Owning or managing vacation rentals can be a fun and lucrative business venture that allows you to own multiple homes, travel around, and generate an additional stream of income. Among the other logistical and legal challenges associated with hosting a vacation rental, maintaining proper accounting records is a major task that must be taken care of to stay compliant and profitable.
Main challenges with vacation rental accounting
Whether you are doing the bookkeeping yourself or are outsourcing it to a qualified professional, there are a few main areas of consideration that you should be aware of with vacation rental accounting. Two main concerns include the tax liabilities and keeping all finances of the rental property organized and up-to-date.
While neither of these concerns should deter you from owning or managing a vacation rental, you should be aware of the complexities that are common in accounting practices. Prepare yourself ahead of time by implementing some of the following tips and recommendations to make your vacation rental accounting simple and straightforward.
Tips & tricks for vacation rental accounting
Keep rental property accounts separate
By having separate bank accounts and credit cards for each rental, provided that they’re also separate from your own personal accounts, you can easily track the revenue and expenses for each property. Depending on whether you’re the owner of the rental or managing it for someone else, this will help you keep track of what each owner earned from their property during a given time without any guesswork.
Track usage of the property
If you own a vacation rental property, you’ll need to track many things for tax purposes. You will need to record how much time the property was spent for personal use, and what portion of time it was used as a vacation rental. This has major tax implications, so keeping accurate and up-to-date records is crucial, so you can have a clear idea come tax season.
Check local regulations
Cities, counties, and states can each have their own rules and regulations when it comes to how they tax vacation rentals–and these laws can change at any time. Make sure you’re aware of all laws that impact your tax liabilities, stay current on any changes in legislation, and ensure that you are setting aside the proper percentage of your revenue throughout the year to cover all taxes.
While vacation rental accounting may be the last thing on your mind when you’re looking into buying or managing a vacation rental, it is still an important aspect of running this type of business. Staying organized and up-to-date with your accounting records throughout the year can really save you time and money in the long run, so don’t overlook this aspect of owning or managing vacation rentals.
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Bailey Schramm is a writer in partnership with vacation rental accounting service, Ximplifi.
