Want to rent out that spare bedroom? Here is how it may affect your taxes.

AirB&B has grown since 2008 from a service primarily for subletting a room to a full service lodging marketplace for short or long term rentals. Embraced at first by Millennials (a person born in the 1980s or 1990s) and students wanting to travel on a budget, it is now utilized by adventurers and travelers of all ages and income levels.

If you have seriously considered offering a spare room, a vacation condo or even your own home to short or long term lodgers, there are some tax considerations you should know about.

First understand each municipality, region and state is different in how they view tax collection for lodging.

State and Local Occupancy Taxes

To be sure, a host should become aware not only of state occupancy taxes (and sales taxes) but also of local occupancy taxes. A local bed tax is not subject to state and local sales taxes. It is up to you to determine if your city or region actually requires the taxes to be paid. They are generally owed on short-term lodging nights plus fees for cleaning or extra guests. Many areas of the country have long-term rental exceptions for stays over a certain number of nights. Although the guest may be charged this type of tax on their accommodation, in a similar way that hotels and other inns charge a lodging tax, it is up to the host to report and pay the tax.

If you are now in the lodging business with your spare room, you may have other concerns including how to report the extra income on your tax return. It’s going to be important to keep good records. There may be different rules if you are renting out your primary residence and only renting it for 14 days or less, each year. It’s important to follow the letter of the tax law. Some hosts new to the rental and lodging business may find they need more information in “sharing economy” tax preparation.

E-file has put together a tax checklist for hosts who are sharing their homes in this way: https://www.e-file.com/checklists/taxes-home-rentals.php.

Additionally, the IRS has made an effort to educate consumers by developing a Sharing Economy Tax Center. It provides guidance and good information for anyone who is using the Internet and other forms of technology (cell phones, notably) to participate in sharing transactions like car sharing, property rentals and sharing and freelance work. Record keeping, estimated taxes and penalties are explained.

Do your research, understand your liabilities and above all else, keep good records.