Tax Guide for Airbnb and Short-Term Rental Hosts

Hosting on Airbnb, VRBO, or a similar platform can generate meaningful income, but that income comes with tax obligations. Whether you rent out a room in your primary home, a separate investment property, or something in between affects how the income is taxed and what deductions are available.

Renting Part of Your Primary Home

If you rent a room in your primary residence, the income is taxable. You deduct expenses proportionally — the percentage of your home's square footage used for rentals — including a share of mortgage interest, utilities, property taxes, and direct rental expenses like cleaning fees and supplies. Deductions can offset the rental income but generally can't create a rental loss against your other income.

The 14-Day Rule

There's a special rule for minimal personal use rentals: if you rent your home for fewer than 15 days during the year, the rental income is not taxable and you can't deduct rental expenses either. This is sometimes called the "Augusta Rule" and it can be surprisingly useful for homeowners near major events who want to rent their home for a brief period.

Investment Properties

If you rent out a property that's not your primary home, the income goes on Schedule E of your tax return (not Schedule C, unless you provide substantial services like a hotel). You can deduct mortgage interest, property taxes, insurance, repairs, property management fees, advertising, and depreciation on the building (not the land).

Depreciation

Depreciation allows you to deduct the cost of the building over 27.5 years for residential rental property, even if the property is actually appreciating in value. This non-cash deduction can significantly reduce rental income for tax purposes. But when you sell, you may have to "recapture" the depreciation at a 25% tax rate.

Occupancy Taxes

Many cities and counties require Airbnb hosts to collect and remit local occupancy or hotel taxes. Airbnb collects these automatically in some jurisdictions; in others, you're responsible. Failing to comply with local occupancy tax rules can create additional penalties beyond your federal income tax obligations.

Passive Activity Rules

Rental losses may be limited by the passive activity rules. If your adjusted gross income is under $100,000, you can deduct up to $25,000 in rental losses against other income, subject to phase-out above $100,000 AGI. Real estate professionals who meet specific activity thresholds can deduct rental losses without limitation.