Tax Guide for Short-Term Rental Owners

Income from renting a property by the night is taxable and usually goes on Schedule E (Form 1040), the same schedule long-term landlords use. The main exception is a home you also live in and rent for fewer than 15 days in the year: you report none of that rent. If you provide substantial services for guests, such as maid service during their stay, the income goes on Schedule C instead and you may owe self-employment tax. If the average guest stay is 7 days or less, a tax loss can offset your wages, but only if you materially participate, meaning you pass one of the IRS tests based mainly on hours worked.

The 14-day rule and personal use

Under IRS Publication 527, the property counts as your home for the year if you use it personally for more than 14 days or more than 10% of the days it is rented at a fair price, whichever is greater. Personal days include days used by you or a co-owner; by a family member of either, such as a spouse, sibling, parent, or child, unless that person pays a fair rent and lives there as a main home; by anyone paying less than a fair rent; and by anyone under a home-swap arrangement. A day you spend working substantially full time on repairs or maintenance is not a personal day.

To split expenses, divide the days rented at a fair price by the total days used. With 160 rental days and 20 personal days, 160 / 180 = 89% of shared costs such as utilities, insurance, and repairs are rental expenses. Costs that belong only to renting, such as platform fees, count in full, and days the property sat open but unbooked count toward neither total. Those 20 personal days also exceed the limit, the greater of 14 days or 16 days (10% of 160), so this property counts as a home and a rental loss would be capped.

Schedule E or Schedule C

On Schedule E, a short-term rental is property type 3, "Vacation/Short-Term Rental," and you enter its fair rental days and personal use days for the year. Rental income reported there is generally not subject to self-employment tax.

Publication 527 moves the income and expenses to Schedule C when you provide substantial services primarily for the guest's convenience, giving regular cleaning, changing linen, and maid service as examples; heat and light, cleaning of common areas, and trash collection do not count. Net earnings on Schedule C can be subject to self-employment tax of 15.3%: 12.4% for Social Security on combined wages and self-employment earnings up to $184,500 for 2026, plus 2.9% for Medicare.

Publication 527 does not say how cleaning between stays is treated. In Chief Counsel Advice 202151005, a 2021 memo that cannot be cited as precedent, IRS attorneys said cleaning between occupants keeps the space fit to rent and is not a service to guests, so that host owed no self-employment tax; a vacation home that added daily maid service, toiletries, beach equipment, and ride-share vouchers did owe it. Passing the 7-day test below does not by itself create self-employment tax, the memo adds. If you add services during stays, ask your tax preparer whether you belong on Schedule C; setting up a legal entity for your short-term rental covers whether an LLC changes the form you file.

Average stays of 7 days or less: when losses offset wages

Under the passive loss rules, a rental loss normally offsets only passive income, such as profit from other rentals, unless you qualify for real estate professional status and materially participate in the rental, or qualify for a $25,000 allowance for owners who actively participate, for example by setting rental terms and approving expenses. The allowance phases out as modified adjusted gross income (adjusted gross income figured without passive losses and a few other items) rises from $100,000 to $150,000. Publication 925 adds a rule for short stays: the activity is not a rental activity if the average period of customer use is 7 days or less, or 30 days or less when you provide significant personal services.

To find the average, divide the total days rented by the number of separate stays. 150 days across 25 stays averages 6 days. Add two 30-day bookings and it becomes 210 / 27 = 7.8 days, which makes the property a rental activity again that year unless you provide significant personal services.

With an average of 7 days or less, a loss can offset wages and other income only if you materially participate, which makes it nonpassive. Meeting any one of Publication 925's seven tests is enough; these three depend only on the current year's work:

1. You worked more than 500 hours on the property during the year.
2. Your work was substantially all the work anyone did on it.
3. You worked more than 100 hours and at least as many hours as any other person, including cleaners, co-hosts, and managers who own no part of it.

Your spouse's hours count with yours even if your spouse is not an owner. If your cleaner logs 140 hours of turnovers, you need at least 140 hours to pass the third test, and a full-service manager who works more hours than you means you fail it. Fail every test and the loss stays passive, without the $25,000 allowance, which covers only rental real estate activities. Log dates, tasks, and hours in a calendar as you go; starting an Airbnb business lists the other counts to keep.

Personal use above the limit overrides all of this: Publication 527 says renting a dwelling you use as a home is not a passive activity, and its loss cap applies instead.

Depreciation on the building and furnishings

Depreciation deducts the cost of the building and contents over set periods; depreciation on rental property shows the math.

• Building, not land: 27.5 years for residential rental property. Publication 946 excludes units in a hotel, motel, or other establishment where more than half the units are used on a transient basis (short stays), so if your property rents almost entirely by the night, ask your preparer whether the 39-year period for nonresidential buildings applies.
• Furniture and appliances: 5 years, or the full cost in the first year through the special depreciation allowance (bonus depreciation), restored to 100% for qualified property acquired and placed in service after January 19, 2025.

Form 1099-K: what platforms report

Booking platforms must send Form 1099-K when your payments for the year total more than $20,000 across more than 200 transactions. Airbnb also files with states that set lower thresholds, including Illinois, Massachusetts, New Jersey, and Virginia. You owe tax on the rent whether or not you receive a form.

Airbnb's form shows gross reservation totals, not your payouts: amounts before its host fees, including cleaning fees and any lodging taxes you charge guests through the platform yourself. It leaves out occupancy taxes Airbnb collects and remits itself and does not adjust for changes or cancellations after check-in. Reconcile it with your booking records, report the rent, and deduct the host fees as commissions and the lodging taxes you paid over as taxes, both rental expenses in Publication 527.

State and local lodging taxes

Lodging taxes are separate from income tax, and the state and the city or county each tell you where to register and file. In Texas, for example, you file the state's 6% hotel occupancy tax with the Comptroller and ask the city and county about their own hotel taxes, which they collect themselves. The state tax applies to houses and condos rented for $15 or more a day for less than 30 consecutive days. A guest who stays at least 30 consecutive days is exempt, from the day they notify you in writing of the long stay, or after the first 30 taxed days if they give no notice.

Who collects depends on how the guest booked:

1. A platform that collects for you. In Texas, a platform that agrees with owners to collect state hotel tax must remit it, so you do not collect state tax on those bookings, but local hotel tax may still be yours to handle.
2. Your own website or a platform that does not collect. You charge guests the tax and file the returns yourself.

Before the first booking, list every lodging tax at the address (state, county, and city), confirm which ones your platform collects there, and ask each tax office whether you must still register or file a return for bookings the platform covers. Short-term rental regulations covers city permits and registration.