Airbnb Tax Deductions

While there’s no shortage of vacation rental tax deductions available in 2021, finding your way through the thicket of confusing regulations and guidance can be tricky. In this timely article, we break down the most significant opportunities the typical short-term rental property owner can pursue to reduce tax liability. For our purposes here, we’ll assume you are operating a full-time vacation rental that’s available 365 days per year with no days allocated for personal use.

The Big Eight STR Tax Deductions

Despite what other online resources might suggest, a handful of expense categories will likely account for the vast majority of your total vacation rental tax deductions. These include, in order of typical significance:

  • PM & OTA Booking Fees
    This is the cut of guest revenue retained by your local property manager and/or online booking platforms like Airbnb, VRBO,, etc. Obviously, you can only deduct these expenses if your income also includes this revenue. If you’re claiming an income number that is already net of these fees, you of course can’t deduct them again.

  • Mortgage Interest
    Not everyone can afford to buy real estate all cash, nor is it always the best strategy. For those owners that carry mortgage debt, interest paid during the year is deductible. The caps and limitations on interest deductions for owner-occupied properties do not apply when the property is held for investment purposes.

  • Depreciation
    This is a big one that’s sometimes overlooked by vacation rental owners. When you hold a property for investment purposes, you are allowed to take annual depreciation deductions against rental income. The amount of depreciation available in a given year is arrived at via complicated calculations and is a function of your original purchase costs and subsequent capital expenses. Further reading on rental property depreciation and cost basis is recommended, as are the services of a qualified CPA.

  • Property Taxes
    Not to be confused with local or state transient occupancy taxes, property taxes are generally paid at the county level and are based on the assessed value of your property for a given year. Some counties have different property tax classifications based on how the property is being used. For example, many counties offer discounts for owner-occupied properties, but may also charge a higher mill rate for short term rentals and commercial properties.

  • Cleaning Fees
    Let’s face it, most vacation rental guests expect squeaky clean accommodations. Consistently meeting this high standard can be expensive. Make sure you’re deducting all relevant cleaning expenses. While we’re on the topic, also be sure you’re including all cleaning fees collected from guests in your reported income calculations.

  • Utilities
    The ugly truth is that a lot of vacation rental guests don’t bother to conserve gas and electricity during their stay. They have no financial incentive to turn the AC off while they’re away for the day, so they often just leave it running. This mean that the utility costs associated with operating a short term rental are often quite high. The good news is that these costs are absolutely tax deductible.

  • Insurance
    The cost of insuring a vacation rental against loss and liability can be significantly higher than regular homeowners’ insurance for the same property. Short term guests are not as familiar with the property as owners or long-term renters, which leads to a higher perceived risk of claims. All insurance costs including for fire, wind, flood, etc. are tax deductible for your vacation rental business.

  • HOA Fees
    If your short term rental is a condo (or a townhouse, etc.) within the jurisdiction of a homeowners association, the monthly or annual dues you pay are probably tax deductible if the property is being utilized for investment purposes.

Depending on your local market and the specifics of your property and management style, other meaningful deductions might include plumbing and electrical repairs, landscaping, pool and spa maintenance, linens, toilet paper, soaps, and other supplies, among many others.

Bigger ticket items like new furniture, appliances, and major renovations are most likely capital expenses that must be depreciated over time, unless your CPA is advising you to take advantage of certain tax provisions like safe harbors and/or accelerated depreciation.