Taxable rents - property I own vs property I manage

[Benjamin DeMuro]

I have my first rental property (STR) going live in the next couple weeks. I understand how the income generated from my property is taxed as I own and manage this property. My in laws are now asking me to manage their lake house property as a STR and plan to pay my wife and I as the property managers. My concern is how the rent received will be reported to me from AirBNB/VBRO on a 1099. Is the rent I disburse to my in laws deductible on a schedule C or E so I'm not taxed on their portion of the rent received? From my own research, I believe I would issue a 1099-misc to my in laws but want to make sure that the rent passed through me (my LLC) would be deductible.

[Dylan Brown]

@Benjamin DeMuro – I can see where your CPA is coming from, and their approach is technically correct. However, based on your situation, I’d recommend pushing back a bit and explaining the specifics of your arrangement.

Most third-party property managers are listed as the main host on Airbnb or VRBO and will input their own banking and tax information so that all payments flow through them on behalf of the property owner.

Typically, the management company collects the gross rental income, deducts its management fee and any expenses paid on the owner’s behalf, and then remits the remaining funds to the property owner.

In this setup:

• You would issue a 1099-MISC to the owner for the full gross amount collected, not just the net amount remitted.

• Separately, you should provide the owner with a monthly or annual summary of all expenses paid on their behalf (including your management fee).

• This allows the owner to deduct those expenses against the 1099 income, effectively reporting only the net rental income they actually received from you.

• The owner would then deduct any other property-related expenses they paid directly (e.g., mortgage interest, property taxes, insurance).

From your perspective:

• You would only recognize income for your management fee and any expenses you paid directly that weren’t reimbursed from rental proceeds.

• You do not need to pick up the full gross rental income you collected on behalf of the owner.

• Likewise, you shouldn’t deduct expenses that were paid using funds that were ultimately remitted to the owner.

DM me if you have more questions!