Taxes

Short-Term Rental Taxes: The Basics Every Airbnb and Vrbo Host Should Know

Occupancy taxes, Schedule E vs. Schedule C, the 7-day and 14-day rules, personal-use limits and what records to keep, explained in plain English.

Jon

— 4 min read
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Short-term rentals (Airbnb, Vrbo, direct bookings) are taxed differently from a standard year-long lease in several ways that surprise new hosts. Some of the differences can work in your favor. Others can create a bill you didn't plan for.

This is a plain-English overview of the main concepts so you can have a better conversation with your tax professional. It isn't a substitute for one. STR taxation is one of the more nuanced corners of the tax code, and the right answer depends on your facts.

Two different kinds of tax

Hosts deal with two separate categories:

  1. Taxes on your guests' stays: occupancy, lodging, hotel, tourist or sales taxes charged by states, counties and cities.
  2. Income tax on your profit: federal and (usually) state income tax on what you earn after expenses.

Let's take them one at a time.

Occupancy and lodging taxes

Many states, counties and cities charge a tax on short stays, usually a percentage of the nightly rate and sometimes cleaning fees. The names vary: transient occupancy tax, lodging tax, hotel tax, tourist development tax, sales tax.

Key points:

  • Platforms collect some of these, but not always all of them. In some places Airbnb or Vrbo collects and remits certain taxes for you. In others they collect only some, or none. Check the platform's help pages for your location, and then check with your state and local tax agencies to see what's left for you.
  • Direct bookings are on you. If you take bookings through your own website or repeat guests, you'll generally need to collect and remit the taxes yourself.
  • Registration may be required. Many jurisdictions require you to register for a tax account, and some require a short-term rental permit or license as well.
  • Filing schedules vary: monthly, quarterly or annually.

Missing these can mean back taxes, penalties and interest, so sort them out before your first guest arrives.

Income tax: where does STR income go?

For federal income tax, most long-term landlords report on Schedule E. Short-term rental hosts may report on Schedule E or Schedule C, depending largely on whether they provide substantial services for guests' convenience.

  • Schedule E (rental income): typical when you provide what a normal rental provides: the space, utilities, Wi-Fi, cleaning between stays.
  • Schedule C (business income): may apply when you provide hotel-like services, such as daily cleaning during stays, meals, concierge or tours. Schedule C income is generally subject to self-employment tax as well as income tax.

Where the line falls is a judgment call your tax professional should make based on how you actually operate.

The 7-day average stay rule

Rental activities are generally treated as passive under the tax code, which limits how losses can be used. But there's an important exception: if the average guest stay is seven days or less, the activity generally isn't treated as a "rental activity" for passive-loss purposes.

Why that matters: if the activity isn't a rental activity and you materially participate in it (there are specific tests, often involving the hours you spend), losses (including depreciation) may be able to offset other income such as wages. If you don't materially participate, the losses are generally still passive.

This is the basis of what people call the "STR loophole." It can be powerful, but it requires careful record-keeping of your hours and a tax pro who understands the tests. Don't plan around it without professional advice.

The 14-day rule and personal use

Two related rules matter if you also use the property yourself:

  • Rented 14 days or fewer in a year: if you rent out a home you also use as a residence for 14 days or fewer during the year, that rental income generally isn't reported, and the rental expenses generally aren't deducted.
  • Personal use limits: if your personal use exceeds the greater of 14 days or 10% of the days it's rented at fair rental price, the property is treated as a residence for tax purposes. Rental deductions are then limited and must be allocated between personal and rental use.

"Personal use" can include days used by family members and days rented below fair market price, so track your calendar carefully.

Common deductible expenses

Typical STR expenses include:

  • Platform fees and service fees
  • Cleaning and laundry
  • Supplies and consumables (toiletries, coffee, paper goods)
  • Utilities, internet and streaming services
  • Repairs and maintenance
  • Insurance (including STR-specific coverage)
  • Property taxes and mortgage interest
  • Furnishings and appliances (often depreciated, sometimes eligible for faster write-offs)
  • Depreciation of the building itself
  • Software, pricing tools, smart locks
  • Professional fees: your CPA, bookkeeper, attorney
  • Occupancy taxes you pay (if you collect and remit them, ask your tax pro how to report the amounts)

Expenses for a property you also use personally generally need to be allocated between rental and personal days.

Forms you may receive

Platforms may send you a Form 1099-K (or similar reporting) showing payments processed. The gross amount on that form can include cleaning fees and taxes collected, and it may not match your net payouts. Reconcile it to your own records so the numbers you report make sense. Keep payout reports from each platform.

Records to keep

Good records turn a stressful tax season into a routine one:

  • Every booking: dates, nights, gross rent, cleaning fee, platform fee, taxes collected and net payout
  • A calendar marking rental days, personal-use days and days blocked for maintenance
  • Receipts for every expense, by property
  • Hours log if material participation matters for you: what you did, when, and how long
  • Occupancy tax filings and payments
  • Purchase documents and improvement costs for depreciation

A spreadsheet built for hosts

The Airbnb/STR Host Tracker ($19) is built for exactly this record-keeping: bookings by platform, fees, nights and occupancy, average stay length, expenses by category and a year-end summary you can hand to your CPA. Pair it with the Rental Property Tax Prep Packet ($24) to organize documents for filing. If you also own long-term rentals, the Rental Bookkeeping Workbook ($27) keeps everything coded to Schedule E lines.

Just starting with one property? The free Single-Property Tracker is a simple place to begin.

Questions to ask your tax professional

  • Should my STR income go on Schedule E or Schedule C?
  • What is my average stay, and do I materially participate?
  • How should I allocate expenses if I use the property personally?
  • How do I report occupancy taxes I collect and remit?
  • What's the best depreciation approach for furnishings and improvements?
  • Do I owe state or local income tax where the property is located?

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This article is for general educational purposes and is not tax or legal advice. Tax rules change and depend on your specific facts; consult a qualified tax professional about your situation. Local occupancy-tax and permit rules vary widely. — Jon, Everyone's Landlord

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