Airbnb is the go-to site for people looking to make for some extra cash off their own home or vacation property. Over the last five years, this way of making a secondary income has become one of the most popular in the US. Besides Airbnb, other sites like HomeAway and FlipKey offer similar features.

If you’ve made a nice profit from these sites, there are a few of things that you need to consider when it comes time to prepare and pay your taxes.

First and foremost, please remember to keep records of rental income and expenses. Insufficient supporting documentation is always the biggest problem for clients with Airbnb income. It is essential that the records you keep are 100% accurate. In fact, this is a legal requirement and if audited you have to provide all supporting documentation to the IRS to justify the numbers and allocations presented on the tax return in question. It might help to start a basic spreadsheet detailing all of the income and expense information in full.

Airbnb may issue you a 1099 form. If you earn more than $20,000 via Airbnb and issue more than 200 transactions during the financial year, you can expect Airbnb to send you a 1099. Toward the end of January each year, you should find that this form is available in your payout preferences section of the website.

What expenses can you take against this income?

You are allowed to take any direct expenses for hosting guests in your home like cleaning fees, supplies and other costs used in the rental. Some Airbnb hosts or property owners actually offer food to their guests. If your rental includes breakfast or the like, you can claim this as a deduction. Again, anytime you purchase products for your guests, be certain to make a note of how much you spent.

You are also allowed to take indirect expenses for hosting guests in your home. This includes a ratable portion of utilities, mortgage interest, property taxes, insurance, repairs and maintenance to the home, landscaping, etc. Again, please record all these expenses for the home so that they may be incorporated as a deduction against your rental income.

Determining the ratable portion of expenses that you are allowed to deduct can get more complex. There are several considerations. Is the whole property or only a portion of it listed with Airbnb? Is the space you are renting ever used for personal purposes outside of the rental period. If so, how many days? If the space is vacant is it still available for rent? Most people mistakenly assume that the ratable portion is the number of days rented divided by 365. That could be correct, but in many circumstances, it is not.

This can be a tricky area, but good documentation goes a long way toward good reporting on your tax return.