Owning a vacation rental on platforms like Airbnb, HomeAway, or VRBO can be an excellent source of income, but it also comes with tax responsibilities that many property owners overlook. At Tavola Group, we help vacation rental owners implement effective vacation rental tax tips, navigate IRS rules, maximize deductions, and avoid surprises at tax time. Talk to a tax advisor to make sure your vacation rental strategy is working for you.
Understanding the tax rules for vacation rentals is essential to protect your profits and ensure compliance. From the 14-day rule to deductions and self-employment taxes, following the right short-term rental tax strategies can save you money and reduce stress.
What is the 14-Day Rule for Vacation Rentals?
One of the most important rules for short-term rentals is the 14-day rule. If you rent your property for 14 days or fewer during the year, and personally occupy it for 14 days or more, you generally don’t have to report the rental income on your taxes.
Even if a platform reports income to the IRS via Form 1099-K, the 14-day rule allows you to exclude this income, but only if you carefully track rental and personal use days.
Keep Detailed Records
Whether you rent a room or your entire property, record-keeping is critical. Track:
- Each rental period
- Personal use of the property
- Expenses tied to rental activity
Accurate records ensure you can apply deductions correctly, allocate expenses between personal and rental use, and provide documentation if the IRS requests it.
Deduct Ordinary and Necessary Expenses
For rentals that exceed 14 days, you can deduct ordinary and necessary expenses directly related to the rental. These may include:
- Cleaning and maintenance costs
- Guest amenities (towels, linens, coffee, etc.)
- Platform service fees
- Utilities and insurance
Keep detailed receipts and documentation to substantiate every deduction.
Apportion Mortgage Interest and Property Taxes
If you rent part of your home or property, mortgage interest and property taxes must be divided between personal and rental use. Only the portion attributable to the rental can be deducted. Accurate allocation ensures compliance and avoids IRS issues.
File Your W-9 With Rental Platforms
Vacation rental platforms are required to withhold 28% of your income if you don’t submit a W-9. Filing this form ensures your income is reported correctly and avoids unnecessary withholding, giving you immediate access to the money you’ve earned.
Deduct Service Fees
Platforms charge service fees for each booking, often called guest-service or host-service fees. For rentals exceeding 14 days, these fees are fully deductible from your rental income, directly lowering your taxable amount.
Consider Local Occupancy Taxes
Many states and cities impose occupancy or transient lodging taxes on short-term rentals. Some platforms collect and remit these taxes automatically, but in other cases, the host is responsible. Staying informed about local rules is critical to avoid penalties.
Know When Self-Employment Taxes Apply
If your rental activity involves providing services like daily cleaning, breakfast, or guest amenities, the IRS may treat you as self-employed. In that case, self-employment taxes will apply in addition to income taxes, covering Social Security and Medicare contributions.
Plan Ahead with Tavola Group
Early planning is key. Short-term rental taxes can be complicated, but understanding the rules and keeping careful records makes a big difference. From the 14-day rule to expense deductions, self-employment taxes, and local occupancy requirements, proactive planning ensures your rental remains profitable and compliant. Contact our team to schedule a free consultation and get a personalized vacation rental tax strategy that keeps more of your earnings in your pocket.
