Do you have California rentals? Are you marketing your home as a rental on Airbnb? As you know Airbnb has created a well branded service to help home owners market their homes for rent. But these rental income opportunities could have unintended consequences.
Homeowners Policy: One of the challenge could be from your insurance company just in case the home is damaged by fire while being occupied by your Airbnb tenants. After all, the insurance company has underwritten the policy with the full confirmation from you that the home will be used as a primary residence. The same goes for other kinds of damages as well that could not be covered since they occur at the hands of your Airbnb tenants and not yours.
Property Type: IRS and your mortgage lender will also not allow you to cross 2 occupancy types. In the eyes of IRS, your home is either a rental or your primary residence. So, it would be wise to contact your CPA or Tax professional to better understand how IRS will treat your rental income if it’s coming from your primary residence.
Mortgage Interest Deduction: Depending on the amount of income you are generating from your primary residence, IRS might disqualify your mortgage interest deduction and treat your primary residence as an investment property.
Refinance Delima: Your mortgage company will find out if you are using your primary home as a rental from examining your Bank Statements. So, your mortgage lender might not be willing to offer you the lowest rate commonly available to your primary residence.
We suspect with the popularity of services like Airbnb, lenders and insurance companies will revise their guidelines accordingly to cover the damages and losses at the hands of your airbnb tenants. But at the mean time, we advise caution for those who should contact their CPA, Insurance and Mortgage lender to make sure you are not violating any of their requirements that show up as tax deductions.
What do you guys think? Are you renting your vacation homes with Airbnb? What has been your experience?