A Property Owner’s Guide to Short-Term Rental Expenses (2024)

FAQs

What does the IRS consider a short-term rental? ›

The IRS defines short-term rentals based on the duration of stay. Generally, a property rented out for less than 30 days at a time is considered a short-term rental. However, this classification can vary based on specific circ*mstances and local regulations.

These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs. You can deduct the ordinary and necessary expenses for managing, conserving and maintaining your rental property. Ordinary expenses are those that are common and generally accepted in the business.

To calculate your deduction, simply multiply your business miles by the standard mileage rate. For example, if you drove 10,000 business miles in 2023, you would multiply this by 0.0655 to give you a mileage tax deduction of $655.

The 7-day rule is a general rule of thumb for vacation rental owners trying to keep the deductible losses to zero for their taxes. If a property is rented for an average of 7 days or less then owners will be eligible for tax-deductible losses.

You're considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for a number of days that's more than the greater of: 14 days, or. 10% of the total days you rent it to others at a fair rental price.

As a quick back-of-the-envelope calculation, the 50% rule is a preferred rule of thumb. According to the 50% rule, a property's operating expenses will likely equal half its gross annual rental income.

Expenses related to traveling to make improvements or renovations to a rental property aren't tax-deductible as these costs are recoverable through depreciation. However, your client may be able to deduct other standard expenses like printing, office supplies, advertising costs, and insurance costs.

It is recommended that you spend 30% of your monthly income on rent at maximum, and to consider all the factors involved in your budget, including additional rental costs like renters insurance or your initial security deposit.

The cost of “improvements” are not deductible — though some or all of the improvements may be recovered through depreciation. The IRS says rental owners may deduct mortgage interest, property tax, operating expenses, depreciation, and repairs.

Is furnishing an Airbnb tax deductible? ›

Appliances, Furniture, and Household Supplies

You need to provide your tenants with the furniture, appliances, and household supplies they need in order to ensure they enjoy a pleasant stay. Because of this, these expenses can absolutely be written off as tax deductions for Airbnb hosts.

One of the biggest hidden costs of renting your home on Airbnb is cleaning costs. You'll need to either clean the property yourself or hire a professional cleaner after each guest. If you hire a professional cleaner, expect to pay $100-$200 per clean.

The IRS allows you to claim travel expenses for business tasks that are ordinary and necessary- meaning- legitimate, common tasks that actually help your business. Collecting rent and maintaining your rentals are examples of ordinary and necessary tasks that would allow you to claim a mileage deduction.

A 10-20% return on investment from your vacation rental property is considered a good profit margin.

Landlords and real estate investors can deduct 50% of meal costs while traveling to visit rental properties they manage for rental income. They cannot write off meals when scouting for prospective rental properties.

Self-rental is an arrangement in which a business and property that it rents are both owned by the same person(s). It is common for a taxpayer to own an operating business and also own the accompanying real estate. That person has to materially participate in the operating company for the self rental rules to apply.

The Internal Revenue Service (IRS) employs a multifaceted approach to identify rental income, like utilizing audits, data matching, access to public and governmental records, advanced technology for pattern recognition, and information from property management companies.

Fair rental days represent the periods your property is generating income by being leased to tenants, important for your tax reporting on Schedule E. Personal use days, however, reflect the time you or your family enjoy the property for personal activities, affecting how you can claim deductions.

Rental income is any payment you receive for the use or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them.