Tax Implications for Short Term Rental Property Owners


As a vacation traveler, you may have stayed in a bed and breakfast or made a reservation in a home or apartment through such online rental sites as AirBnB, HomeAway, or VRBO. Renting a home, condo, or even a spare room for a vacation or short time has become a common practice. These short-term rentals provide benefits to the traveler as well as the property owner.

Tax Deductions for Expenses

For the property owner, the one main benefit is additional income, but there may be other advantages too. Although the income from short term rentals is generally taxable, many expenses that would not normally be deductible for a property owner become legal deductions for a short term rental business owner.

If you rent your property for 15 days or more during a calendar year*, you can deduct expenses for such things as utilities, repairs, supplies, and cleaning services. Additionally, you can deduct home mortgage interest, qualified mortgage insurance premiums, real estate taxes, and casualty and theft losses. PHB is more than happy to help you get all applicable deductions while making sure you report the income and expenses on the correct Federal tax forms, depending on your circumstances.

If you also use the property as your primary residence for part of the year, the rules concerning what is deductible and how much you can deduct get complicated. In this case, you must calculate the rental deductions as a percent equal to the percent of time the property is rented. If you are considered a resident in your short term rental property, we urge you to seek the advice and guidance of a professional CPA when it is time to prepare your taxes.

Permits May Be Required

If your short term rental property is located in Nashville, be advised that you are required by law to obtain a permit. There are other rules concerning the operation of the rental that you must follow as well. You can review Nashville’s ordinances here:

*IF you rent for less than 15 days in a calendar year, you are not required to report the income, but you also cannot take rental expense deductions.