Short-Term Rental Tax Deductions Property Owners Can Claim

To qualify for tax deductions, you need to meet the IRS’s 14-day rule for short-term rentals. You must rent your property for more than 14 days per year and limit personal use to no more than 14 days or 10% of the total days it’s rented per year.

If you rent your property for 14 days or fewer during the year, the rental income is not taxable—you don’t even report it. But you can’t deduct any rental expenses.

If you exceed 14 days of personal use, your property is classified as a personal residence. Then you’re only allowed to make deductions to offset your rental income in proportion to the amount of time guests are renting the property.

So if you use your vacation home for both personal and rental purposes, it’s important to keep detailed records of your total expenses and allocate them between rental and personal use. This information will make things easier when tax season comes and may help you save significant money.

Key Short-Term Rental Tax Deductions You Can Claim

If your short-term rental property produces reportable income, you should consider these most common deductions to minimize your tax liability.

Mortgage interest. If you pay a mortgage on the short-term rental property, you can deduct the mortgage interest you pay during the year as a business expense. This tax deduction is especially beneficial for those with larger loans since mortgage interest can be a significant expense.

Depreciation lets short-term rental investors deduct part of the property cost over time, usually 27.5 years, to reflect wear and tear. Depreciation is a non-cash deduction that reduces taxable income, so it’s often called “paper loss”. It allows you to recover the cost of the property over time by writing off a portion of your property’s value each year as a capital expense.

However, bonus depreciation speeds up that process. It allows you to write off the full cost of certain assets (like appliances, furniture, flooring, and other building components identified through a cost segregation study) in the first year.

Property taxes paid to state and local tax authorities are fully deductible against rental income. Property taxes are another major expense for STR owners, so be sure to include this deduction on your tax return.

Insurance premiums. You can deduct the cost of any insurance that covers your STR property. Homeowner's insurance, short-term rental insurance, and liability insurance that protects against guest-related incidents all qualify.

Utilities like electricity, gas, water, sewer, trash, internet, and cable are essential for guest comfort and are considered necessary operating expenses. If the property is exclusively a rental, you can deduct 100%.

Costs of repairs and maintenance. Routine expenses to repair or maintain your STR property, such as fixing plumbing issues, HVAC servicing, appliance repairs, pest control, lawn care, and snow removal, are deductible as business expenses. However, substantial repairs or additions that add value, for example, installing a security system or replacing a roof, are considered an “improvement” to the property and must be depreciated.

Cleaning and turnover costs. You can deduct expenses for professional cleaning between guest stays, laundry services, and cleaning supplies as necessary for operating your short-term rental business. Just remember to keep thorough records and receipts for all cleaning-related expenses to make the most of this tax-saving opportunity.

As you can see, every penny spent on keeping your rental property spotless and creating a welcoming environment for your guests directly reduces your taxable income. And if you choose Hospitable, you can set up task rules, and our system will automatically assign tasks to your cleaners whenever a reservation ends or a new guest arrives. With Hospitable Tasks, you can automate turnover cleanings and pay your cleaners and maintenance staff when their job’s done.