Short-term rental operator taxes and deductions

The seven-day rule decides everything here. Where average guest stays are seven days or fewer, the property is not a rental activity under the passive loss rules at all. So if you materially participate, losses can offset your other income rather than being locked up until you sell. Longer average stays and the ordinary passive rules apply.

Furnishing a unit is Section 179 and bonus depreciation territory, and a cost segregation study on the property itself accelerates a great deal more. Cleaning and turnover costs are ordinary and are the largest recurring line for most operators. Occupancy taxes collected from guests are never your income, whether the platform remits them or you do.

The rest of the short-term rental operator deduction list

Ordinary and necessary business expenses, deductible in full in the year you pay them, provided they are genuinely for the business:

Mortgage interest
Property tax
Cleaning and turnover
Furnishings
Property insurance
Utilities
Platform fees
Repairs and maintenance
Software subscriptions

Worth knowing

Average stays of seven days or less take a rental outside the passive rules, which is the difference between losses you can use now and losses you cannot.

That is what is specific to this trade. The larger deductions are the universal ones, see the full checklist.

What each deduction is worth to you

On $100,000 of profit with no state income tax, $1,000 deducted saves $305, 30.5%, because it comes off self-employment tax and income tax together:

Net profit	Saved per $1,000 deducted	Effective
$40,000	$231	23.1%
$100,000	$305	30.5%
$200,000	$297	29.7%

The last row is worth less than the one above it, and that is not a mistake: past the Social Security wage base the self-employment part of the saving drops from 15.3% to 2.9%, and the higher income-tax bracket does not quite make up the difference. A deduction is worth most in the middle.

Add a state income tax and every row rises. The 1099 calculator applies that layer.

Where this comes from

The rules on this page that are specific rather than general are cited below. Follow a link to read the provision itself rather than taking our word for it:

Average guest stays of seven days or fewer take the activity outside the passive rental rulesReg. 1.469-1T(e)(3)(ii)(A)
Being non-passive does not by itself make the income subject to self-employment taxIRC 1402(a)(1); Reg. 1.1402(a)-4(c)(2)

What these words mean

Section 179: A rule letting you deduct the whole cost of equipment in the year you start using it, instead of spreading it over the years you own it.
Depreciation: Spreading the cost of something long-lasting, a vehicle, a camera, a tractor, across the years you use it, rather than deducting it all at once.

General information about how these deductions work, not tax advice. Whether a particular expense is deductible for you depends on facts this page does not have, check with a tax professional before claiming anything listed here.