Airbnb Taxes: What You Need to Know as a Host

When renting out your property on Airbnb, you may be required to pay several types of taxes, depending on your location and the STR laws and regulations in your area.

Income tax. Short-term rental income is generally considered taxable, and in the US it must be reported on the federal income tax return, whether you rent out a private room in your home, an investment property, or a vacation home. However, you may deduct certain expenses related to your rental activity to reduce your taxable income.  

Transient occupancy tax. Many cities and states impose an occupancy tax on short-term rentals, which is sometimes called a lodging tax or a tourism tax. The tax rate and requirements for collecting and remitting the transient occupancy tax vary by location. In certain locations, Airbnb automatically calculates and collects this tax, simplifying the process for hosts, while in others, hosts must handle it themselves.

Sales tax. In some regions, STR hosts may have to collect and remit sales tax on their rental income. This tax is charged on the total amount paid by a guest, including a cleaning fee and other additional host fees. Airbnb may handle sales tax collection and remittance in certain locations.

Property tax. Owners must pay property taxes annually based on the assessed value of their rental property. Depending on your location, using a property for short-term rentals may result in a higher tax rate.

Self-employment tax. In the US, if you provide substantial services to guests, such as regular cleaning during stays, concierge features, or meals, and your involvement goes beyond basic property management and resembles a hotel-like operation, your rental activities may be classified as a business. Then, you’ll be subject to self-employment tax, which covers Social Security and Medicare contributions.

Taxes on Airbnb Income: Things You Should Keep in Mind

Hosts are generally required to pay US income tax on their Airbnb earnings. Still, there is an exception—if you rent out your home for 14 days or fewer during a year, you don’t have to report or pay taxes on your Airbnb income.

However, if you exceed the 14-day rental period, then the rental income is considered taxable and must be reported. The good news is that you can also deduct ordinary and necessary expenses associated with running your Airbnb property to offset your rental income.

If you are actively involved in managing your Airbnb rental, you become eligible for more extensive deductions. Under the short-term rental tax loophole, you can claim such deductible expenses as insurance costs, Airbnb service fees, cleaning costs, mortgage interest, maintenance and repairs, utilities, furniture, household supplies, and depreciation on property. Claiming available Airbnb tax deductions can help minimize your tax liability and increase your profit.

How to Handle Airbnb Taxes Effectively

Whether you manage a single Airbnb rental or operate a growing portfolio, you are responsible for understanding local tax laws, and proper tax reporting is part of running a legitimate business. Keeping meticulous records of all your earnings and expenses will help you prepare for tax season and simplify Airbnb income tax filing.  

If you manage one or two Airbnb properties, you could probably track your income and expenses on a spreadsheet. However, most hosts benefit from using vacation rental accounting software like QuickBooks, which can simplify your bookkeeping tasks.