You can save money or earn a few extra bucks by sharing. All you need are a few apps. Thinkstock By Lisa Gerstner, Contributing Editor From Kiplinger's Personal Finance, July 2014 Neal Gorenflo of San Francisco went on a sharing crusade three years ago. He identified about 30 ways to share, including peer-to-peer car-rental service Getaround, home-sharing service Airbnb and a shared nanny for his infant son. Gorenflo estimates that his efforts over the course of a year saved him $17,000. But he had another agenda: Gorenflo is co-founder of Shareable, a nonprofit online hub for information on the sharing economy. He wrote about his year of sharing to generate enthusiasm for his passion.See Also: 12 Sites to Help You Save and Make Money By Sharing In the three years since Gorenflo conducted his experiment, the sharing economy has exploded. There are nearly 5,000 sharing companies, organizations and programs, according to the Mesh Labs Global Sharing Economy Index. And by some estimates they will generate billions of dollars in revenue this year. Belt-tightening during the economic downturn played a role in the rise of the sharing economy, as more people looked for ways to turn idle resources into cash—say, by renting out a barely used bicycle to neighbors—or to take on a part-time gig. In turn, sharing services found a willing clientele of newly cost-conscious consumers. And technological advances, in the form of the Web and mobile applications, made it easy to connect services with people. Trust, but Verify Certain obstacles to sharing, such as a reluctance to stay in someone else’s home or hop into a stranger’s car, have been addressed by the entrepreneurs who launched sharing services. “Trust is one of the most compelling parts of the sharing economy,” says Natalie Foster, executive director of Peers, an advocacy organization for the sharing economy. Many services do background and identity-verification checks. Car-sharing service RelayRides screens renters for major traffic violations, for example, and ride-sharing platform Lyft checks the driving and criminal records of its drivers. Technology has also addressed the trust issue. Both purveyors and users can often set up profiles, which may include photographs and information about themselves as well as their offerings. People can also review their experiences using star ratings or descriptions. A rude driver who gets a poor rating from a passenger may have a hard time finding other people to pick up. And an Airbnb host who receives rave reviews for providing a bed with a firm mattress and a sumptuous breakfast spread may have more requests than she can accommodate. Advertisement Still, the sharing economy has some sticking points. Before you get involved, you’ll want to ensure that you have proper insurance coverage and that you understand the tax ramifications. And legal conflicts have been heating up. Some industries—particularly the hotel and taxi interests—are supporting efforts to slow down, if not derail, the sharing economy, which is disrupting the old ways of doing business. “We’re reinventing familiar services rather than creating entirely new ones,” says Arun Sundararajan, an economist and professor at New York University’s Stern School of Business. That makes them difficult to regulate under current laws. Save Money If you want big savings, look at the areas where you spend the most money. For Gorenflo, sharing a nanny accounted for nearly $11,000 in savings over the price of a private nanny. Transportation is another area where you can make a sizable dent. If you live in an urban area and can get by without owning a car, car-sharing services can save you a bundle. With Zipcar, for example, you can rent a car on an hourly or daily basis, with rates starting at $8 to $10 an hour (plus an annual membership fee of $6 a month or $60 per year). Car2Go rents out Smart fortwo cars on a per-minute basis. Prices start at 38 cents per minute, plus a $35 registration fee. Through peer-to-peer car-sharing services, such as Getaround and RelayRides, you can rent cars from other people. Staying in someone else’s home while traveling can also lower your expenses. On Airbnb, you could recently rent a private bedroom and bathroom in a townhouse near Seattle’s Capitol Hill neighborhood for $65 a night on a mid-July weekend. For $166 a night, you could rent a one-bedroom apartment in the same neighborhood. Many find the experience as attractive as the price: It can be an opportunity to connect with someone local as you travel and, in some cases, to try out unusual accommodations. Rather than paying for separate hotel rooms on a trip to Barcelona for a wedding last year, Pooja Lalwani and four other people used Airbnb to book a stay in a three-bedroom apartment for $260 a night. “We had spent a ton of money on our flights, and none of us wanted to waste money on an expensive hotel,” says Lalwani of Washington, D.C. Advertisement See what kind of collaborative options are available in your community, too. For a $5 annual fee, residents of Mount Rainier, Md., can borrow drills, saws, ladders, lawn mowers and more through a community tool shed. Prospective borrowers must create an account at NeighborGoods.net, a site that helps community members connect to share household items. Evan Wilder, who helps run the Mount Rainier program, says he has saved $1,725 by borrowing tools through the program instead of purchasing them, based on the value of the tools he has used. Make Money The sharing economy has a flip side: You can earn money with nearly as few hassles as you can save it. Have the time to drive passengers around town in your car? Sign up for UberX or Lyft, which connect you with people in need of a ride. Customers pay through a mobile app. Gregory Bernard loves driving around in his Tesla S, and he began picking up passengers in Washington, D.C., through UberX to help boost his income after his wife became pregnant and stopped working. He drives when he has time outside of his day job with the U.S. government and makes up to $300 a week. Lilla Von and John Duhon rent out three bedrooms in their four-bedroom home near Raleigh, N.C., through Airbnb. Most of the year, prices start at $45 to $55 a night, depending on the room (Airbnb charges hosts 3% of the booking fee). In 2013, they earned about $4,000—which covered a semester of college housing for their son, who attends the University of North Carolina at Charlotte—and they made about $1,500 from January through April of this year. With the help of a tax accountant, the couple report income to the IRS with the Form 1099 Airbnb provides and deduct expenses related to the business, including breakfast food for guests, laundry supplies and even electricity used. The social aspect is the cherry on top. “People come as strangers and leave as friends,” says Lilla. To ensure safety, she requires guests to verify their identities through Airbnb (with a driver’s license or Social Security number), explain the reason for their stay, and include a photograph of themselves in their profiles. Advertisement Some people are carving full-time jobs out of the sharing economy. Unhappy as a programmer at Goldman Sachs, Michael Lam left his job in 2011. He began boarding dogs in his New York City home through DogVacay, a service that unites pet owners who need a temporary place for their dogs to stay with people willing to take in pets. Today, Lam charges a standard rate of $50 a night, and he typically watches three dogs at a time, in addition to his own. After the 15% cut that DogVacay takes from his earnings, he makes about $4,000 a month, and he draws another $1,000 to $3,000 monthly by training and walking dogs. “I have a quality of life that I didn’t have at my corporate job,” says Lam. “I don’t wake up dreading the day.” Hayley Ortner of San Francisco charges $8 per hour to rent out her Ford Fiesta through Getaround, and she makes about $600 to $800 monthly. The vehicle is often available because Ortner bicycles to get to her job as a nanny, and anywhere from ten to 25 renters use her car each month. Getaround installed a device in her car that works in tandem with a mobile app, and drivers can use the app to unlock her car during the rental period. One day, she realized at the last minute that she’d need her car when a renter was scheduled to use it. Getaround quickly found the renter another option. To rent out your car through Getaround, your vehicle must be a 1995 model or newer and have fewer than 150,000 miles on it. If you want to pick up passengers through a ride-sharing service, you’ll likely have to pass a background and driving-record check, plus meet other requirements. To carry passengers through Lyft, for example, you must be at least 23 years old and own a car in good condition no older than a 2000 model. If you’re thinking about taking the leap into some part of the sharing economy, keep tabs on how a service is faring with your local and state governments to avoid run-ins with the law. And be sure you’re not breaking any rules that hit closer to home—say, by renting out a room in your apartment when your lease forbids it. Advertisement Talk to others who are already doing something similar, suggests Sundararajan. “Once you convert your apartment into something to rent out, it changes the meaning of the space to you,” he says. “It goes from being your space to part of your livelihood.” You may be able to contact people through a sharing platform to ask about the pros and cons of sharing or tips on how to, say, screen who you allow to rent your home or car. It’s Nice to Share, but… Before you transform an extra room into a guest haven or turn your car into a taxi, make sure you’re covered by insurance. You need to report your earnings to the IRS, too. Insurance Some sharing platforms have policies that promise to cover certain issues. But before you rent out your home or car, notify your insurer and ask how the change affects your coverage. Airbnb’s “Host Guarantee” provides up to $1 million in coverage for damage to your property that a guest causes—with exceptions. It doesn’t cover cash, collectibles, rare artwork, jewelry, pets or personal liability. DogVacay provides some protection to hosts in case a dog gets sick (check with your homeowners insurance company to see if you’d need any additional coverage). If you rent out space in your home to other people regularly, you need a hotel or a bed-and-breakfast policy to cover anything that the platform facilitating the rentals doesn’t, says Loretta Worters, vice-president of communications for the Insurance Information Institute. Generally, car- and ride-sharing platforms provide insurance policies that kick in when the car is in use for the service—say, when you pick up a passenger or when a renter begins driving your car. But that coverage may not always be enough. In December, for instance, an UberX driver who was available for hire (but not carrying a passenger) struck and killed a pedestrian. The victim’s family sued Uber, and Uber has since added a contingency policy in case a driver’s insurer refuses to provide coverage when she is available to pick up passengers but not carrying any. Whether you rent out your car or use it to take people around town, you’ll need a commercial auto-insurance policy, with higher premiums to reflect the greater risk. That’s true even if the sharing service provides a policy that kicks in first. If you fail to notify your insurer of your driving gig and your car is involved in an accident while it’s in service, your policy will be canceled. Plus, you may be subject to additional fees, and you won’t be covered for the accident, Worters says. Taxes No matter how much you earn, you’re responsible for reporting your earnings to the IRS. Some sharing services will send a Form 1099 to you (as well as the IRS) reporting income you’ve earned. You may not get a 1099 if your earnings are less than $600 for the year. Generally, you’ll report income from rental activities on Schedule E. Earnings from other ventures, such as selling clothes on an online exchange or driving passengers through a ride-sharing service, may go on Schedule C. In some circumstances, you may not have to worry about taxes. If you rent out your primary home for 14 or fewer days per year, for example, you don’t need to report the income. If you’re not sure you’re handling your taxes properly, consult a tax professional.