If you’d like to bring in some extra money by renting out your home—as a growing number of people are doing, thanks to websites such as Airbnb—you may take comfort in the protections that home-rental websites offer.

Example: Airbnb offers $1 million in insurance coverage against liability claims in case a guest sues you over an injury and up to $1 million for property damage caused by guests. But beware: There still are potential financial consequences if you take in paying guests…

Taxes. The IRS lets you rent out your home only up to 14 days a year without having to pay tax on the income.

Self-defense: Ask your accountant whether you owe any state and city taxes on the income in addition to federal tax. If you rent your home for more than 14 days per year, you can deduct certain related expenses from your rental income, such as fees you pay to Airbnb, as well as mortgage interest and real estate taxes for the rental portion of your home. But your expense deduction cannot exceed your rental income for the year.

Penalties for illegal subletting or renting. Many municipalities have restrictions on short-term rentals.

Self-defense: Check with the local housing authority. Also, make sure you are not violating the terms of your lease if you yourself are a renter…or the rules of your condo association, homeowners association or other relevant body.

Items not covered by the Airbnb property damage “guarantee.” It’s called a guarantee because Airbnb itself, not an insurance company, provides coverage and establishes its own rules. For instance, damage to any fine art or antiques you own isn’t covered by Airbnb. Neither are losses due to guests stealing items.

Self-defense: Add a “security deposit” to your listing. Guests are charged if Airbnb later determines that a guest is responsible for damages not covered by the Airbnb guarantee. Airbnb allows the host to set the security deposit from $95 to $5,100. Browse other local listings to help choose an amount that’s right for your home.

Related Articles