Reporting Short Term Rental Tax

The majority of the content for this article is provided by Pillow's partner

Avalara MyLodgeTax assists with all vacation rental taxes and licenses for property owners, helping them stay compliant with local regulations.

Upon listing your property with Pillow

Vacation Rental Tax: Vacation rental taxes are taxes property owners are required to collect from their guests and file from revenue earned off their rental property. Vacation rental tax may also be referred to as accommodations tax, bed tax, hotel tax, lodging tax, transient occupancy tax, occupancy tax, rental tax, room tax, sales tax, or tourist tax.

Overview of process

  1. Register your property as a short term rental: The registration processes varies by location. In some states property owners are required to register with the state. In other locations property owners are required to register with the state, county, and city. Please check your local legislation for your cities requirements.
  2. Collect tax from guests: Property owners can include the correct tax rate using their pricing controls within their Pillow Dashboard. Guests will then pay the amount needed for sales/lodging/rental taxes. For more information about what taxes are collected click here.
  3. File tax return & pay taxes: Tax returns can be due monthly, quarterly, or annually depending on the location of the rental. The rental tax related to a property should be reported to the state the property is located and not to the state where the homeowner resides. You will be required to complete tax return forms and remit payment.

Vacation rental taxes on Airbnb

Airbnb can pay the vacation rental tax on a property owners' behalf for certain areas. Property owners can request this as follows:

  1. Log into their Airbnb account.
  2. Call Airbnb at +1 855 424 7262 for assistance.

See Airbnb's article for more information.

Vacation rental taxes on HomeAway / VRBO

HomeAway and VRBO does not submit the TOT on property owner's behalf. This means that property owners are responsible for submitting their income from their reservations on HomeAway and VRBO at the end of the year.

When it's time to file taxes

Determinations for the tax

Taxes are charged on total revenue (rent) collected from guests. Any mandatory fee is included in the taxable amount, including cleaning fees. There are no deductions for occupancy taxes. These taxes are paid to the city, county, and/or state your property is located.

Deductions

When reporting income taxes, you can deduct expenses from your rental revenue. Property owners can deduct expenses, such as real estate taxes, mortgage interest, insurance, cleaning/maintenance utilities, and more. However, special rules govern the amount of expenses property owners can deduct.

Below is a summary of the basic rules that will cover most vacation rental situations:

Property is available for short-term rental 14 days or less per year

  • Property owners who rent out their home 14 days or less per year are not required to report the income on their tax return.

Property is available for short-term rental full-time

  • If a property is rented out full-time, property owners are required to report all rental income but can deduct any property expenses. To qualify for this category, property owners must occupy the property less than 14 days per year or 10% of the days rented.

Property is available for short-term rental but also used personally

  • Property owners are required to allocate their expenses between their rental activity and their personal use. Under this category, expenses are not allowed to exceed the rental income (although property owners can carry these losses forward).

For more information on taxes, please visit our partner’s website: Avalara MyLodgeTax.

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