What Can You Write-Off on a Vacation Rental Property?
Short-term rentals have become an increasingly popular option for property owners with second homes, homeowners with a spare bedroom or an ADU, and property managers who oversee multiple vacation rentals — all of whom are looking to make an extra buck on the booming tourism market and vacation rental scene in their area.
However, amidst the excitement of preparing the home, verifying you have the right insurance, getting the listing posted, and then hosting guests, it’s crucial not to overlook the foundational understanding that a short-term rental is a business, and it should be treated as such.
This includes familiarizing yourself with the types of insurance available to short-term rentals like the comprehensive Commercial Homeowners policy offered by Proper Insurance, as well as, understanding tax write-offs for a short-term rental business like Airbnb, Vrbo, or booking directly.
Short-Term Renting is a Business
Whether you decided to list your second home as an Airbnb property while you aren’t using it or have 500 condos listed across the Florida panhandle, in both scenarios short-term renting is a business.
Often we find that people start short-term renting before they realize that what they are doing is the same as running a restaurant, a coffee shop, or a storefront. It is a business venture and needs to be treated as one, and also protected as one, with the right insurance.
Treating your short-term rental property as a business and carefully managing your expenses will not only help you maximize Airbnb tax write-offs but also improve your overall financial management. By keeping personal and business expenses separate, documenting property use, and understanding the nuances between personal and guest use, you can navigate the tax landscape more effectively while optimizing your deductions for your Airbnb or Vrbo.
Tax Deductions for a Short-Term Rental Business
When it comes to short-term rentals, knowing which expenses you can deduct is essential in maximizing your tax savings and financial planning. Here are some key short-term rental tax deductions to consider for your Airbnb/Vrbo:
If you have a mortgage on your short-term rental property, you can deduct the interest paid on that loan. This can be a significant deduction, especially in the early years of your mortgage when interest payments are higher.
The cost of insurance coverage for your short-term rental property is fully deductible. This includes the comprehensive coverage offered by Proper Insurance, the nation’s leading provider of short-term rental insurance.
Taxes and Licenses
Property taxes are another deductible expense for short-term rental owners. Plus, many state and local jurisdictions also have sales, lodging, occupancy taxes, and licenses which are all deductible so make sure you are compliant with local laws for your rental.
Utilities and Maintenance
Expenses related to utilities (such as electricity, gas, water, trash, and internet) and regular maintenance can also be deducted. These may include cleaning fees, landscaping, pest control, HOA fees, and repairs.
You can deduct a portion of the property’s value each year through depreciation. Consult with a tax professional to determine the allowable depreciation amount for your specific situation.
Advertising and Marketing
Expenses related to advertising and marketing your short-term rental, such as listing or hosting fees, professional photography, website design, and online promotions, are deductible.
If you hire professionals to help manage your short-term rental, such as property managers, accountants, and lawyers, their fees can be deducted as business expenses.
Furnishings and Remodels
The expenses incurred from furnishing (furniture and appliances) your short-term rental property or undertaking remodels can also be considered tax write-offs, allowing you to deduct the costs and potentially reduce your taxable income.
Consult with a Tax Professional
Remember that tax laws can vary depending on your jurisdiction and tax situation, so it’s crucial to consult with a tax professional who specializes in short-term rental property taxation. They can provide guidance based on your specific circumstances and ensure you take advantage of all available deductions.
This guide is based on current knowledge and sources available at the time of writing. Always consult with a tax professional for the most up-to-date advice specific to your situation.
Verify Your Insurance Coverage Today
Are you interested in learning about the best insurance coverage available on the market to short-term rental owners/hosts?
Proper Insurance is the nation’s leading short-term vacation rental insurance provider, with the most comprehensive policy on the market. We protect homes in all 50 states with unmatched coverage for your property, revenue, and business liability, customized to include guest-caused theft/damage, liquor liability, amenity liability (bikes, kayaks, hot tub, etc.), bed bugs, squatters, and more.
Give us a call at 888-631-6680 to receive a comprehensive coverage comparison.