Does renting a room on AirBnB make all interest taxable?
"What theyre fishing for is whether the money was earned in the U.S.  It's essentially an interest shelter, and/or avoiding double taxation.   They're saying if you keep income you make outside the US in a bank inside the US, the US thanks you for storing your foreign money here and doesn't tax the interest (but the nation where you earned that income might).   There is no question that the AirBNB income is ""connected with a US trade or business"".   So your next question is whether the fraction of interest earned from that income can be broken out, or whether IRS requires you to declare all the interest from that account.   Honestly given the amount of tax at stake, it may not be worth your time researching.   Now since you seem to be a resident nonresident alien, it seems apparent that whatever economic value you are creating to earn your salary, is being performed in the United States. If this is for an American company and wages paid in USD, no question, that's a US trade or business. But what if it's for a Swedish company running on Swedish servers, serving Swedes and paid in Kroner to a Swedish bank which you then transfer to your US bank? Does it matter if your boots are on sovereign US soil?  This is a complex question, and some countries (UK) say ""if your boots are in our nation, it is trade/income in our nation""... Others (CA) do not.  This is probably a separate question to search or ask. To be clear, the fact that your days as a teacher or trainee do not count toward residency, is a separate question from whether your salary as same counts as US income." "It says that you are exempt ""as long as such interest income is not effectively connected with a United States trade or business"". So the interest is from money earned from doing business with/through AirBnb, a US company. So you will have to report it. Even if your bank doesn't send you a 1099-INT, you have to report it, unless it is under $0.49 because the IRS allows rounding."
Normally, yes, you would have to pay. If you are in the US, or a citizen of the US, then IRC Sec. 61 would levy tax on all income. Even if you find money on the ground, that will generally be taxable income (the treasure trove doctrine). If you are paying foreign income taxes, the US may allow credit. "Is all interest on a first time home deductible on taxes? What does   that even mean? If I pay $14,000 in taxes will My taxes be $14,000   less. Will my taxable income by that much less? If you use the standard deduction in the US (assuming United States), you will have 0 benefit from a mortgage.   If you itemize deductions, then your interest paid (not principal) and your property tax paid is deductible and reduces your income for tax purposes.  If your marginal tax rate is 25% and you pay $10000 in interest and property tax, then when you file your taxes, you'll owe (or get a refund) of $2500 (marginal tax rate * (amount of interest + property tax)). I have heard the term ""The equity on your home is like a bank"". What   does that mean? I suppose I could borrow using the equity in my home   as collateral? If you pay an extra $500 to your mortgage, then your equity in your house goes up by $500 as well.   When you pay down the principal by $500 on a car loan (depreciating asset) you end up with less than $500 in value in the car because the car's value is going down.   When you do the same in an appreciating asset, you still have that money available to you though you either need to sell or get a loan to use that money. Are there any other general benefits that would drive me from paying   $800 in rent, to owning a house? There are several other benefits. These are a few of the positives, but know that there are many negatives to home ownership and the cost of real estate transactions usually dictate that buying doesn't make sense until you want to stay put for 5-7 years.   A shorter duration than that usually are better served by renting.  The amount of maintenance on a house you own is almost always under estimated by new home owners." "I am not a lawyer nor a tax accountant, so if such chimes in here I'll gladly defer. But my understanding is:  If you're romantically involved and living together you're considered a ""household"" and thus your finances are deemed shared for tax purposes. Any money your partner gives you toward paying the bills is not considered ""rent"" but ""her contribution to household expenses"". (I don't know the genders but I'll call your partner ""her"" for convenience.) This is not income and is not taxed. On the off chance that the IRS actually investigated your arrangement, don't call any money she gives you ""rent"": call it ""her contribution to living expenses"". If you were two (or more) random people sharing a condo purely for economic reasons, i.e. you are not a family in any sense but each of you would have trouble affording a place on your own, it's common for all the room mates to share the rent or mortgage, utilities, etc, but for one person to collect all the money and write one check to the landlord, etc. Tax law does not see this as the person who writes the check collecting rent from the others, it's just a book-keeping convenience, and so there is no taxable transaction. (Of course the landlord owes taxes on the rental income, but that's not your problem.) In that case it likely would be different if one person outright owned the place and really was charging the others rent. But then he could claim deductions for all the expenses of maintaining it, including depreciation, so if it really was a case of room mates sharing expenses, the taxable income would likely be just about zero anyway. So short answer: If you really are a ""couple"", there are no taxable transactions here. If the IRS should actually question it, don't refer to it as ""collecting rent"" or any other words that imply this is a business arrangement. Describe it as a couple sharing expenses. (People sometimes have created tax problems for themselves by their choice of words in an audit.) But the chance that you would ever be audited over something like this is probably remote. I suppose that if at some point you break up, but you continue to live together for financial reasons (or whatever reasons), that could transform this into a business relationship and that would change my answer." "Given your clarifying comment that you're asking about the length of stay rather than AirBnB in particular, I'd say there is a decent chance there will be tax differences.  The difference is unlikely to be in income tax, but many cities have local ordinances that impose transaction taxes on short stays.  For instance, the town where I live has a ""transient occupancy tax"" for any paid stay of less than 31 days. Unfortunately, because these taxes are often levied by individual cities, it's hard to know whether one applies in your case.  One town may impose no tax while the town right next to it does impose a tax.  You'll have to look at what your local laws are.  This could be easy if your town has a nice comprehensive website about local laws; if not you may have to do some deeper research. In any case, you should definitely look into it, since there could be penalities if there is a tax and the city finds out you're not paying it.  As AirBnB has grown in popularity, many municipalities have begun to crack down on AirBnB renters who try to make money without paying taxes like a regular motel (as well as conforming to other laws, e.g., running a business in a neighborhood zoned residential)." Very simple. If it wasn't rented, it's deductible as a schedule A home mortgage interest. If it was rented, you go into Schedule E land, still a deduction along with any/every expense incurred. "It is legal.  They're probably going to give you a 1099-MISC, which is required of businesses for many cash payments over $600 in value to all sorts of counterparties.  (Probably box 3 of 1099-MISC as is typical in ""cash for keys"" situations where one is paid to vacate early)   A 1099-MISC is not necessarily pure income, but in this case, you do have money coming in.  This money isn't a return of your security deposit or a gift. The payment could possibly be construed by you as a payment to make you whole, but the accounting for this would be on you.  This is not a typical situation for IRS reporting.   However, if you are uncomfortable with potentially explaining to the IRS how you implemented advice from strangers over the internet, the safest course is to report it all as income.  Look at it this way: you did enter into a mutual contract, where you were paid consideration to release your leasehold interests in the property." You only need to report INCOME to the IRS. Money which you are paying to a landlord on behalf of someone else is not income. On the revenue only. This amount of 10$ will be considered as interest and fully taxable. It will not be a capital gain. But why would you decide to declare it as an income? 100$ is insignificant. If you lend small amount to friends it cannot be considered a lending business. how much taxes would I pay on my income from the rent they would pay me? The same as on any other income. California doesn't have any special taxes for rental/passive income. Bothe CA and the Federal tax laws do have special treatment, but it is for losses from rental. Income is considered unearned regular income and is taxed at regular brackets. Would I be able to deduct the cost of the mortgage from the rental income? The cost of mortgage, yes. I.e.: the interest you pay. Similarly you can deduct any other expense needed to maintain the property. This is assuming you're renting it out at FMV. If not, would I pay the ordinary income tax on that income? In particular, would I pay CA income tax on it, even though the property would be in WA? Yes. Don't know how WA taxes rental income, but since you are a California tax resident - you will definitely be taxed by California on this, as part of your worldwide income. @Pete B.'s answer is good, but there's an important note to consider for tax purposes.  It's too large for a comment, so I'm adding it as an answer. And that is: you cannot claim the property as a rental property under certain conditions.  This affects things like claiming mortgage interest (which you don't have), and depreciation in value (which a rental is allowed). See IRS topic 415 for details, but I've included an important excerpt below with emphasis added: If you rent a dwelling unit to others that you also use as a residence, limitations may apply to the rental expenses you can deduct. You're considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for more than the greater of:  ...   A day of personal use of a dwelling unit is any day that it's used by: Talk to a tax accountant to better understand the ramifications of this, but it's worth noting that you can't just rent it to her for a paltry sum and be able to take tax advantages from this arrangement. The answer is simple. You can generally claim a deduction for an expense if that expense was used to derive an income. Of course social policy sometimes gets in the way and allows for deductions where they usually wouldn't be allowed. Your rent is not tax deductible because this expense is not used to derive your income. If however you were working from your home, example - you had a home based business, and you dedicated a part of your home for your work, say an office, then part of your rent may then become tax deductible. I converted my downstairs of my house to a suite with an eye to AirBNBing.  But I also make money renting it out (I live in a resort town with ridiculously high rents).  So far, I haven't tried AirBNB because renting it out on yearly contracts seems like less total effort and I make 1100 gross per month (net is probably closer to ~800)  I have no idea if I could make more on AirBNB.  Maybe one of these years I'll try it for a few months. But is the money saved taxable? Not sure I understand the Question. If say you have salary of Rs 5 Lacs, after paying taxes and expenses, lets say you save Rs 1 lacs. If you keep this 1 lacs in savings account. You will get interest. If this interest is less than Rs 10,000/- it is not taxable. If it is more that Rs 10,000 then the additional amount is taxable. i.e. if you get a savings bank interest of Rs 15,000/- the difference Rs 15,000 minus Rs 10,000; i.e. Rs 5000 is taxable. Note if you keep the 1 lacs in Fixed Deposits, then all interest even if you get Rs 1 is taxable. Edit: If you invest the Rs 1 lacs in Tax Saving FD [lock-in period of 6 years], then Yes. You can claim deduction under section 80C. Using US tax code, given that your profits are less than 250K, given that you lived in that home over two years, then yes the 150K is tax free.   That is your money in the US. Note:  I won't get into all of the specifics but basically you need to live somewhere 2 years.  You get 250K per person, up to 500K.  Most enhancements count as money towards the home.  So most/all of your 12k should be discounted.  However there is a lot of fine print in this and a lot of interpretation on what is normal upkeep and what is an enhancement. "In general, you are allowed to deduct up to $50/month per student (see page 4), but only if you aren't reimbursed. In your case, since you are receiving a stipend, the full $2000 will be treated as taxable income. But the question of ""is it worth it"" really depends on how much you will actually spend (and also what you'll get from the experience). Suppose you actually spend $1000/month to host them, and if your combined tax rate is 35%, you'll pay $700 in additional taxes each month, but you'll still profit $300 each month. If your primary motivation for hosting students is to make a profit, you could consider creating a business out of it. If you do that you will be able to deduct all of your legitimate business expenses which, in the above example, would be $1000/month. Keeping with that example, you would now pay taxes on $1000 instead of $2000, which would be $350, meaning your profit would now be $650/month. (Increasing your profit by $350/month.) You will only need to keep spending records if you plan to go the business route. My advice: assume you won't be going the business route, and then figure out what your break even point is based on your tax rate (Fed+state+FICA). The formula is: Max you can spend per month without losing money = 2000 - (2000 * T) e.g. if T = 35%, the break even point is $1300. Side note: My family hosted 5 students in 5 years and it was always a fantastic experience. But it is also a very big commitment. Teenagers eat a lot, and they drive cars, and go on dates, and play sports, and need help with their homework (especially English papers), and they don't seem to like bed times or curfews. IMHO it's totally worth it, even without the stipend..."