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We live in California, US.

We lived in an apartment in a very bad school district. We only realized that this January when we had to register kindergarten for our son, and we had to move. However, at that time we still had 3 months in our contract, and the agent wanted us to pay 2 month-rent penalty for breaking the lease (although it was never written anywhere in the contract).

We still rent a new apartment. To avoid paying penalty, instead of returning the previous apartment, we put it on Airbnb. That means we rented two apartments at the same time. What we earned from Airbnb is less than what we paid for the agent for the old apartment, let alone the bills for it.

My question:

  • Do I need to declare this income when filing my 2018 tax return? considering that I was actually losing money.

If the answer is yes:

  • How do I also declare the rent I paid to the agent, to show that I actually didn't earn anything.
  • What tax form do I need? Airbnb issues W-9 form for US person, W-BECI for non-US person with TIN, and W-8BEN for non-US person without TIN.

I'm not a US person. I have lived in the US for more than 3 years with a working visa, so I'm a resident for tax purpose (I also have EAD as my green card application is pending). I submitted a W-9 form to my employer so they can withhold the tax from my salary. I have SSN, so no TIN.

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    Rental income/loss goes on Form 1040 Schedule E. You might want to report the income, since it might allow you to deduct the rent you paid on the old place after you moved, thereby reducing your tax liability. I suspect you're more likely to find someone who knows whether that is the case at Personal Finance & Money. – phoog Jun 1 '18 at 21:38
  • @phoog Thanks, should I just duplicate the question on that site? – qsp Jun 1 '18 at 21:48
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My question: Do I need to declare this income when filing my 2018 tax return? considering that I was actually losing money.

Yes. If you would otherwise have to file income taxes if you didn't have this money losing venture, you need to report this income. If you otherwise wouldn't have to file an income tax return, you don't have to file an income tax return simply to report a loss from a money losing rental, but you would still want to do so, because reporting the loss in this year could reduce your income taxes in future years.

When you lose more money than you earn from sources other than capital gains, you have what is called a "net operating loss" or "NOL" for short, that can be carried forward to future years to reduce your income for income tax purposes.

An exception applies if a business or rental losses money year after year after year. In that case, the IRS considers the business or rental to be a hobby rather than something done with an intent to make money and the loss is disallowed. But, obviously, that exception does not apply to your case.

If the answer is yes: How do I also declare the rent I paid to the agent, to show that I actually didn't earn anything. What tax form do I need?

Usually, you would report the rents received as income on Schedule E to your primary tax form (probably a 1040NR) and list the money paid to the agent and any other expenses you incurred as expenses. This will generate a net loss and can be used to reduce your income subject to taxation from other sources.

Under the tax law that takes effect in 2018, you can't deduct as many expenses related to the rental as you could in prior years. But, you can still certainly deduct the rent you paid for the property that you then leased to a third party in short term rentals.

Airbnb issues W-9 form for US person, W-BECI for non-US person with TIN, and W-8BEN for non-US person without TIN.

A Social Security Number (SSN) is one of several forms of Taxpayer Identification Numbers (TIN). So you would provide Airbnb with a W-BECI. Airbnb will then send a Form 1099 to you early next year, and will send another copy of that Form 1099 to the IRS. The fact that the IRS will learn about your gross rental income from short term rentals from Airbnb is one of the main practical reasons that you should file a tax return declaring that income.

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