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8 Short Term Rental Tax Deductions to Claim in 2026
Short term rental tax deductions cover the ordinary and necessary costs of running a rental: mortgage interest, property taxes, platform fees, cleaning, management, insurance, repairs, and depreciation. At 3 Putt Properties, LLC, we see owners in Manlius, Banner Elk, and Surf City lose deductions to thin records more often than to gaps in tax knowledge. How many you can claim depends on how many days you personally use the home.
Key Takeaways
IRS Topic 415 says a dwelling counts as a residence when personal use exceeds the greater of 14 days or 10% of the days rented at a fair rental price, and that status limits your deductions.
A home rented for fewer than 15 days during the year does not report that rental income and does not deduct expenses as rental expenses.
Mortgage interest, property taxes, insurance, utilities, cleaning, repairs, advertising, management fees, and platform fees are the common deductions; shared costs are split by rental days divided by total rental and personal days.
Residential rental property commonly depreciates over a 27.5-year recovery period, per Stessa; repairs are deductible in the year incurred, while improvements are capitalized.
Average guest stay and services provided decide whether income goes on Schedule E or Schedule C, and material participation affects whether losses can offset other income.
State and local occupancy or sales taxes are separate from federal income tax and vary by jurisdiction. Confirm every figure with a CPA.
Tax rules for STRs sit on top of a business that swings hard by season. According to AirROI, Town of Manlius rentals averaged $4,216 in monthly revenue during peak months at 63.4% occupancy and a $261 daily rate, against $2,040 in low-season months at 42.7% occupancy. Mortgage interest, insurance, and property taxes arrive at the same size every month. That mismatch is why tracking deductible costs month by month matters more in a seasonal market than in a steady one.
This guide lists eight deduction categories, then walks through the IRS tests that decide whether you can claim them, a worked allocation example, depreciation, and a recordkeeping checklist. Everything here is general information for 2026 based on IRS guidance and published tax-professional analysis; your CPA decides how it applies to your return. For income benchmarks before you run the numbers, see how much you can make on Airbnb in Banner Elk.
What Can I Write Off for a Short-Term Rental?
A short-term rental write-off is an expense that is ordinary and necessary for the rental, paid during the year, and not capital in nature, according to Airbnb and EY's U.S. tax guidance. Capital costs, such as a new deck, get depreciated instead of deducted at once. The eight categories below cover the line items most hosts on Airbnb, VRBO, and HomeAway track, and each one passes the same test: the cost exists because of guest stays, not your own use.
1. Mortgage Interest and Real Estate Taxes
Mortgage interest and real estate taxes are the two largest recurring write-offs on most financed rentals, and IRS Topic 415 lists both among potentially deductible rental expenses. A home rented full time usually deducts the rental share of each bill. A home you also use yourself splits them by days, as the allocation example below shows.
Use your lender's year-end interest statement and the county tax bill as source documents. Your escrow payment is not the deduction. Only the interest and tax it covered count.
2. Platform Service Fees and Advertising
Platform service fees are the commissions Airbnb and VRBO (formerly HomeAway) take from each booking, and they count as a cost of earning rental income. Airbnb's tax guide lists service fees, advertising, credit-card convenience fees, and guest refunds processed through its Resolution Center as rental-specific examples.
Paid listing promotion and listing photography typically fall under advertising as well. Record income at the gross booking amount and fees as a separate expense line, so your books reconcile cleanly with platform payout statements. If you list on several channels, keep a fee tally for each one.
3. Cleaning, Laundry, and Supplies
Turnover cleaning is a direct rental cost, which means it needs no personal-use split when the expense only exists because of guest stays. Kahn Litwin lists cleaning between renters alongside advertising, booking fees, and management fees as direct rental costs.
The cleaning fee you charge guests is rental income; what you pay the cleaner and the laundry service is the expense. Supplies such as toiletries, paper goods, and hot tub chemicals belong here too. Expensive items like mattresses or a full linen refresh may need to be depreciated instead, so ask your CPA where the line sits.
4. Property Management and Co-Host Fees
Property management fees are payments to a manager or co-host for running the rental, and Kahn Litwin lists them among direct rental costs deductible against rental income. Full-service STR managers typically charge 15-30% of gross booking revenue, while co-hosting arrangements typically run 10-18%. Because those percentages come off gross revenue, this is often one of the largest lines on your return. For a breakdown, read what property managers charge and what each fee covers.
Hiring help also changes your tax picture, so weigh the real math on self-managing versus hiring before you decide. Ask any manager for monthly statements that itemize fees, cleaning, and repairs by property. At 3 Putt Properties, LLC, we treat that level of detail as a baseline, because your CPA needs it in March.
5. Utilities, Internet, and Streaming
Utilities are the electricity, gas, water, trash, internet, and TV costs of keeping a rental guest-ready, and Airbnb and EY's tax guidance names several of them as possible expense examples. Vacant nights between bookings still count as rental utility use, because the property is held out for rent.
If you stay at the home yourself, allocate the bills by days. A hot tub on a mountain deck draws power in January whether or not anyone is booked. Run utilities through a dedicated rental bank account or card so the statements double as records.
6. Insurance and HOA Fees
Insurance premiums and HOA dues are fixed operating costs, and both show up on IRS and Airbnb lists of deductible rental expenses. If your policy covers the property for short-term rental use, the rental share of that premium belongs on this line. A standard homeowner policy that excludes rentals is a coverage problem, and it is worth fixing before you worry about the deduction.
Special assessments are a gray area. A one-time charge for a new community roof may be a capital improvement, while routine dues are operating expense. Ask your CPA before you classify one.
7. Repairs and Maintenance
Repairs and maintenance are costs that keep the rental in its current working condition, and Stessa notes they are deductible in the year incurred, unlike improvements, which must be capitalized and depreciated. Replacing a failed hot tub pump, fixing a leaking faucet, patching drywall, and servicing HVAC are repairs.
Installing a hot tub where none existed, adding a deck, or replacing an entire roof is an improvement. Snow removal and driveway upkeep in markets like Beech Mountain and Boone are ordinary maintenance. When a project sits between the two, keep the contractor's invoice and scope of work so your CPA can make the call.
8. Permits, Licensing, and Professional Fees
Permit, licensing, and professional fees are the administrative costs of running a legal STR, and Kahn Litwin notes that required permits and local licensing fees may be deductible against rental income. Airbnb and EY's guidance also names legal and accountancy fees as possible examples.
Rules differ by town, so Banner Elk, Boone, and Surf City each have their own permit and registration steps. Travel to the property for rental purposes can be deductible in some situations, but mixed vacation trips invite questions. Keep a log of each visit with its purpose, such as an inspection or a vendor meeting, and skip claiming trips that were mostly leisure.
Which IRS Rules Decide How Your Rental Is Taxed?
The IRS classification test is a sequence of four questions about rental days, personal use, average guest stay, and services provided, and your answers determine which deductions you can claim and which form you file. Work through them in order:
Rented fewer than 15 days? Under IRS Topic 415, you do not report that rental income and you do not deduct expenses as rental expenses.
Personal use above the greater of 14 days or 10% of rental days? The home is treated as a residence, and rental expenses may be limited by gross rental income.
Average stay length? EisnerAmper describes an STR as generally having an average rental period of 7 days or less, or 30 days or less when significant personal services are provided.
Substantial services? Rental income is generally reported on Schedule E, but substantial services can require Schedule C and may trigger self-employment tax. IRS Publication 527 covers the distinction.
The two 14-day thresholds trip up many hosts: one counts days you rent, the other counts days you use the home. They are separate tests with different consequences. EisnerAmper's analysis of short-term rental tax impacts explains how steps three and four drive reporting.
How Do You Split Expenses Between Personal and Rental Use?
Expense allocation is the process of dividing shared costs by the share of days a property was rented, using the formula Kahn Litwin describes: rental days divided by total days of personal and rental use. The numbers below are hypothetical, built for a home rented 120 days and used personally for 20 days, so the rental share is 120 divided by 140, or 85.7%.
Expense | Annual cost (illustrative) | Treatment | Rental deduction |
Real estate taxes | $6,000 | Shared, 85.7% | About $5,143 |
Mortgage interest | $12,000 | Shared, 85.7% | About $10,286 |
Insurance | $2,400 | Shared, 85.7% | About $2,057 |
Cleaning between guests | $4,800 | Direct rental cost | $4,800 |
Platform service fees | $5,000 | Direct rental cost | $5,000 |
Notice the residence test here. Ten percent of 120 rental days is 12, so the greater figure is 14 days, and 20 personal days exceeds it. This owner's home counts as a residence, and deductions can be capped by gross rental income. Your CPA applies the exact ordering. Log personal days on a shared calendar the day they happen, because reconstructing them in March rarely works.
How Do You Calculate Rental Property Depreciation?
Rental property depreciation is a deduction that recovers the cost of the building, not the land, over a set recovery period, and Stessa notes residential STR property commonly uses 27.5 years. As a hypothetical, a $400,000 building basis divided by 27.5 gives roughly $14,545 per year, before your CPA applies the IRS conventions for the first and last year.
Furnishings and appliances are tracked separately from the building and generally recover faster, so keep invoices for every purchase. Improvements such as a new deck or hot tub join the depreciation schedule instead of the repair line. If you are budgeting a refresh, review these vacation rental interior design choices that pay off and note which spend is capital.
Can Short-Term Rental Losses Offset W-2 Income?
A nonpassive STR loss is a rental loss that can offset other income, such as W-2 wages, while a passive loss generally cannot. EisnerAmper explains that material participation can make an STR activity nonpassive, potentially allowing losses to offset other income, subject to the applicable rules.
Three gates apply. Your average stay must fit the STR classification, you must meet the material participation standard, and the home must not be limited by the residence rules, which cap expenses at gross rental income. Many of the out-of-state owners we talk to assume a first-year loss automatically offsets wages. It does not, and a full-service manager handling operations can affect your participation. Settle that question with your CPA before the year starts, not in April.
What Records Do You Need to Support Every Deduction?
Rental recordkeeping is the paper trail proving each expense was ordinary, necessary, and tied to rental use, and the IRS publishes tips on rental real estate income, deductions and recordkeeping. Keep this checklist for each property:
Receipts and invoices, filed by property and month
Airbnb and VRBO payout and booking statements
A calendar of rental days, personal-use days, and discounted-guest days
Your lender's interest statement and the property tax bill
Permit, license, and insurance declaration documents
Contractor invoices, with repairs and improvements filed separately
A purpose log for any trips to the property
Software helps, but the habit matters more than the tool. Look for bookkeeping that tags income and expenses by property, stores receipt images, and exports reports your CPA can use for Schedule E. Stessa publishes a detailed guide to short-term rental tax deductions and is one rental-focused option owners compare. Hire a CPA who handles STRs, because a generalist can miss the classification steps above.
Do Occupancy and Sales Taxes Change the Income Tax Picture?
Lodging occupancy tax and sales tax are state or local levies collected from guests, separate from federal income tax. The Journal of Accountancy notes that state and local sales taxes and hotel occupancy taxes may apply to short-term rentals, with rules varying by jurisdiction.
In North Carolina, check with the NC Department of Revenue and your town or county, since Beech Mountain, Surf City, and Wrightsville Beach do not all work alike. In New York, start with the New York State Department of Taxation and Finance. Track collected taxes on their own ledger line, because they are remitted rather than earned, and confirm the income-tax treatment with your CPA.
Final Word on Short Term Rental Tax Deductions in 2026
Short term rental tax deductions reward owners who classify the rental correctly, log every personal day, and keep clean records by property. Start with the four IRS questions on rental days, personal use, average stay, and services. Then separate your rental accounts, build the day calendar, and bring in a CPA who understands STRs before year-end rather than after it. Thresholds and rules change, so verify current figures against IRS guidance each tax season.
If tracking this alongside pricing, turnovers, and guest messages feels like a second job, talk through your numbers with our team at 3 Putt Properties, LLC. Our revenue management has delivered a 25%+ revenue increase compared with other regional managers, and we handle the operations your records depend on.
Frequently Asked Questions
How does the Airbnb 14-day tax rule work?
The rule has two sides. Under IRS Topic 415, a home rented fewer than 15 days in the year does not report that income or deduct rental expenses. Separately, personal use above the greater of 14 days or 10% of rental days makes the home a residence for tax purposes, which limits deductions. Confirm which side applies with your CPA.
How is an Airbnb different from a short-term rental?
Airbnb is a booking platform. A short-term rental is the property and the activity of renting it for brief stays, whether booked on Airbnb, VRBO, or direct. Tax rules follow the rental activity, including average stay, personal use, and services provided, not the platform's name.
Does the 7% rule for rental property affect your taxes?
The IRS guidance used in this article does not define a 7% rule. Investors use informal rules of thumb under that name to screen purchases, and definitions vary by source. Treat it as screening shorthand and rely on IRS guidance and your CPA for deductions.
Does the 80/20 rule for Airbnb change what you can deduct?
No. The 80/20 label appears in informal hosting advice with differing meanings, and it does not appear in IRS Topic 415 or Publication 527. Deductibility turns on the ordinary and necessary test, personal use days, and how your rental is classified.
Why are vacation rental fees so high, and can you deduct them?
Guest totals stack the nightly rate, a cleaning fee, a platform service fee, and local taxes, while owners carry management, insurance, and utility costs behind the scenes. For owners, platform fees, cleaning costs, and management fees are deductible rental expenses. Collected occupancy taxes are remitted to the jurisdiction rather than kept.
How can you verify short-term rental legality with the city and an HOA before buying?
Ask the municipal planning or zoning office whether STRs are permitted and which permit or registration applies, then request the HOA's current covenants in writing. Rules differ between towns such as Banner Elk, Boone, and Surf City, so never rely on a listing summary. Permit fees you pay later are generally deductible rental costs.
Written by Eric McCarty, Found, CEO at 3 Putt Properties, LLC
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