A practical, owner-focused guide to reporting income, handling lodging taxes, and staying on the right side of local rules.
Running a short-term rental isn’t just about bookings and great reviews — it’s a business with real tax and compliance obligations. This guide breaks down the essentials so you can plan ahead, avoid penalties, and keep more of what you earn.
How Airbnb Income Is Taxed
Most owners report rental income on Schedule E (rental income and expenses). If you provide substantial services similar to a hotel — think daily housekeeping or frequent personal services — the activity may be treated as a business and reported on Schedule C, which can trigger self-employment tax. This distinction affects your tax rate and which expenses are allowed, so it’s worth confirming with your tax pro.
Platform Tax Forms & Reporting
Depending on payout amounts, platform and processor rules, you may receive a 1099-K or 1099-NEC. Even if you don’t receive a form, you must still report all rental income. Ensure your payout details (legal name, TIN/SSN/EIN, and address) are correct in your host settings to avoid mismatches.
Best practices
- Match total payouts to your bank statements and platform reports.
- Track gross income and separately track fees (platform, payment, cleaning, etc.).
- If you use multiple platforms or direct bookings, consolidate the data monthly.
State & Local Lodging / Occupancy Taxes
Most jurisdictions impose lodging, hotel, or occupancy taxes on short-term stays. Some platforms collect and remit these taxes in certain locations; in others, you must register, collect from guests, file returns, and remit. Cleaning fees and other charges are often taxable — check your local definitions.
What to confirm locally
- Whether the platform collects/remits in your city/county/state.
- Registration requirements and filing frequency.
- What counts as a taxable “short-term” stay (e.g., < 30 days).
- Whether fees (cleaning, pet, extra guest) are taxable.
Owner tips
- Display tax as a separate line so it’s clear and traceable.
- Calendar reminders for filing deadlines (monthly/quarterly).
- Keep confirmation numbers and copies of returns with your records.
Want a quick refresher on local rules concepts? Browse the Lunigo Knowledge Base.
Licenses, Permits & Registrations
Many municipalities require STR registration numbers, inspections, or business licenses. Zoning and HOA/COA rules can also restrict short-term rentals. Operating without the proper paperwork can result in fines or forced shutdowns.
Checklist
- City/county STR registration (display number if required).
- Business license & tax account setup (state and local).
- Zoning/HOA compliance letter or permit on file.
- Life-safety requirements (detectors, egress, occupancy limits, etc.).
Deductions, Depreciation & Mixed-Use Rules
Ordinary and necessary expenses are generally deductible. For properties used by both you and guests, expenses are usually allocated between personal and rental days. Keep clear documentation to support the allocation.
Common deductible categories
- Mortgage interest, property taxes, insurance.
- Utilities, internet, maintenance, supplies.
- Platform/processing fees, professional services.
- Repairs (vs. improvements) and allowable travel.
Depreciation & improvements
- Buildings and certain improvements may be depreciated.
- Capital improvements are added to basis; repairs are typically expensed.
- Keep purchase/installation documents and in-service dates.
If the activity is on Schedule C, you may have additional considerations (e.g., self-employment tax and different deduction rules). Confirm with your CPA.
Recordkeeping, Payouts & Cash Flow
Clean books reduce audit risk and uncover opportunities. Separate bank accounts for your STR make life easier and keep your audit trail tidy.
Do this monthly
- Reconcile payouts to platform reports and bookings.
- Categorize expenses correctly (repairs vs. improvements, supplies vs. capital).
- Set aside funds for estimated taxes and lodging tax remittances.
For planning revenue scenarios, try your internal resources & calculators to stress-test ADR and occupancy assumptions.
Quick FAQ
Do I owe tax if I didn’t receive a 1099?
Are cleaning fees taxable?
What counts as “short-term” for lodging tax?
When would my STR be on Schedule C?
Make Compliance a Non-Issue
Keep your STR running smoothly with clear books, on-time filings, and smart planning. When you’re ready for a second opinion or want help dialing in the numbers, we can walk you through next steps.
Disclaimer: This article is general information, not tax or legal advice. Laws change and vary by location. Consult a qualified professional about your specific situation.
