Uber, Lyft, Airbnb, Etsy, Rover, TaskRabbit. In case you have used some of these services–or provided services to allow them to others–you’re a member of the sharing economy.

If you have only used these types of services (and never provided them), plus there is no need to worry about the tax implications however, if you’ve rented out a spare room in your house via a company like Uber or Airbnb you are probably collecting a fee–a portion of which goes for the provider (on this example, Airbnb) along with a portion that you keep for providing the service. But whether it is your full-time gig or even a part-time job to create a little extra cash, you need to be conscious of the tax consequences.

Millennials are the primary people that use sharing economy but Gen X and Boomers use it too; plus a recent PWC study found that 24 percent of boomers, age 55 and older, will also be providers. While many folks are looking to earn a little bit of more income, some dive in it full-time hoping they are able to earn an income, and still, others simply enjoy meeting new people or providing a site that assists people. What a lot of people don’t understand is that this supplemental income could impact their taxable income–especially when they have a full-time job with an employer.

In Life insurance quote , that more income might become a tax liability as soon as you figure out your government tax bill. In order to avoid surprises at tax season, it’s more valuable than in the past to be proactive in understanding the tax implications of the new sharing economy gig and seek the advice of a good tax professional.

Tip: For those who have a job with an employer make sure your withholding reflects any other income derived from your side gig (e.g. boarding pets at your house . through Rover or driving to get a ride-share company like Uber on weekends). Use Form W-4, Employee’s Withholding Allowance Certificate, to produce any adjustments and submit it in your employer who’ll utilize it to find the amount of federal taxes to become withheld from pay.
New Business Owner
While you might not necessarily think of yourself like a newly self-employed business proprietor, the internal revenue service does. So, even when you work through a business like Airbnb or Rover, you’re considered a business owner and therefore are in charge of your own taxes (including paying estimated taxes if you need to). The choice is yours to keep a record of income and expenses–and obviously, to keep good records that substantiate your income and expenses (more about this below).

Note:If you receive income from your sharing economy activity, it’s generally taxable even though you don’t receive a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement, or another income statement.

Now, for your very good news. Like a company owner, you are eligible to certain deductions (subject to special rules and limits) that you cannot take as an employee. Deductions decrease the quantity of rental income that is at the mercy of tax. You could also be able to deduct expenses directly related to enhancements made exclusively for your invited guests. For example, if you rent a room inside your apartment through Airbnb, amounts you spend on draperies, linens, or even a bed, could be deductible.

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