New to short-term rental taxes? Start with our complete STR tax guide →
The 14-day rule — the best deal in the tax code
If you rent your primary residence for 14 days or fewer in a calendar year, the rental income is completely tax-free. You don't even have to report it. This is sometimes called the "Augusta Rule" because of golf fans who rent their homes during The Masters tournament.
Real example: You rent your home for $400/night during a 10-day local festival. You earned $4,000 — and owe zero federal tax on it. No reporting, no Schedule E, nothing. You just made $4,000 tax-free.
Two important catches:
- You also can't deduct rental expenses for those days. The income is free, but so are the expenses.
- It must be your primary residence — a dedicated rental property doesn't qualify.
If you rent for 15+ days, regular rules apply and you must report all rental income — including those first 14 days.
→ Want the full breakdown? The 14-day rule: complete guide — Augusta Rule mechanics, edge cases, and what counts as a "day."
Schedule E vs Schedule C — which one applies to you?
This single distinction changes whether you pay 15.3% self-employment tax. Most hosts file Schedule E (passive rental). Some must file Schedule C (active business).
| Form | When it applies | SE tax? |
|---|---|---|
| Schedule E | You rent the space, period. No daily services. | No (saves 15.3%) |
| Schedule C | You provide substantial services like daily cleaning, meals, concierge, transportation | Yes (15.3%) |
"Substantial services" is the key phrase. Standard hospitality (clean linens, Wi-Fi, basic supplies, toiletries) does not trigger Schedule C. You'd need to be doing things like:
- Daily housekeeping during a stay
- Cooked breakfast or meals (like a B&B)
- Tour or transportation services
- On-site concierge / front-desk-type service
Most Airbnb hosts file Schedule E. That avoids self-employment tax entirely — a meaningful tax savings (15.3% on net income).
→ Schedule C vs Schedule E for short-term rentals — the full decision framework, including what "substantial services" actually means.
What is a 1099-K and when does Airbnb send one?
Airbnb sends a 1099-K to hosts based on federal and state thresholds:
- Federal threshold (2025): $2,500 in gross payments (down from $5,000 in 2024; was $20,000+200 transactions before that). The long-term target is $600.
- State thresholds: Some states have lower thresholds — Massachusetts and Vermont at $600, others at $1,000–$10,000.
Even if you don't receive a 1099-K, you must report all rental income. The form is informational; the tax obligation exists regardless.
What can Airbnb hosts deduct?
This is where most hosts leave money on the table. Anything ordinary and necessary for the rental is deductible. Categorize them as either direct rental expenses (100% deductible) or shared expenses (deductible by the rental-use percentage).
Direct expenses — 100% deductible
- Airbnb service fees — what Airbnb takes from each booking
- Cleaning fees if you pay a cleaner
- Toiletries, soap, paper goods, coffee for guests
- Linens, towels, bedding for the rental
- Repairs and maintenance of the rental space
- Photography for your listing
- Smart locks, keypads, security cameras for the rental
Shared expenses — % based on rental use
If your rental is part of your home (e.g., a guest room or in-law suite), deduct the rental-use percentage of:
- Mortgage interest (the rental portion only)
- Property taxes (the rental portion only)
- Utilities — electric, gas, water, internet
- Homeowners insurance (rental portion)
- HOA fees (rental portion)
Rental-use percentage is calculated by either days rented (rental days / total days) or by space (rental sq ft / total sq ft) — pick the one that applies most accurately.
Depreciation — the deduction most hosts miss entirely
The biggest deduction available to Airbnb hosts is depreciation of the rental property structure. The IRS lets you deduct the cost of the building (not the land) over 27.5 years.
Real example: You bought your rental property for $400,000 — say $100,000 of that is land value and $300,000 is the building. You can deduct $300,000 / 27.5 = $10,909 per year in depreciation. On a property that nets $25,000 in rental income, depreciation alone wipes out 44% of taxable income.
Furniture, appliances, and equipment are depreciated faster — typically 5–7 years. A $5,000 furniture spend deducts roughly $1,000/year for 5 years.
The depreciation gotcha: When you sell the property, the IRS "recaptures" the depreciation — meaning you pay tax on the depreciation you took (currently 25% rate). It's still a tax win because you defer the tax for years and the recapture rate is often lower than your regular income rate. But know it's coming.
→ Advanced: The STR tax loophole — if your average rental period is 7 days or fewer, those depreciation losses may be deductible against your W-2 income.
- →The 14-day rule — the best deal in the tax code
- →Schedule E vs Schedule C — which one applies to you?
- →What is a 1099-K and when does Airbnb send one?
- →What can Airbnb hosts deduct?
- →What about state and local taxes?
- →Should Airbnb hosts form an LLC?
- →Common mistakes Airbnb hosts make
- →Frequently asked questions
- →The bottom line
What about state and local taxes?
Beyond federal income tax, Airbnb hosts may owe:
- State income tax — varies by state (0–13.3%)
- Occupancy tax / lodging tax / hotel tax — often 8–17%, charged to guests but you may be responsible for collecting and remitting
- Sales tax — some states/cities charge sales tax on short-term rentals
Airbnb collects and remits occupancy taxes automatically in most major US cities. Check your dashboard for a list of which taxes Airbnb handles in your jurisdiction. If they don't handle it, you do.
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Check my hosting hustle — free →Should Airbnb hosts form an LLC?
For Airbnb specifically, an LLC is more commonly recommended than for most side hustles, and the reason is liability. A guest who slips on your stairs, has a carbon-monoxide incident, or claims emotional distress could sue you personally. Without an LLC, your home, savings, and other assets are exposed.
An LLC owning the rental property separates personal and business assets. Combined with proper short-term-rental insurance, it's the standard setup for serious hosts. Discuss with an attorney before transferring property into an LLC — there can be mortgage and property tax implications.
Common mistakes Airbnb hosts make
1. Skipping depreciation
Hosts who file their own taxes often don't depreciate the property. That's tens of thousands in lifetime deductions left on the table. If you've been hosting for years and never claimed depreciation, the IRS lets you catch up via Form 3115 — talk to a CPA.
2. Filing Schedule C unnecessarily
Some hosts assume "I run an Airbnb business" means Schedule C. Unless you provide substantial services, file Schedule E. The 15.3% self-employment tax savings is real money.
3. Not tracking rental days
The 14-day rule and the rental-vs-personal-use percentage both depend on knowing how many days the property was rented. Keep a calendar — Airbnb's own dashboard exports this.
4. Mixing personal and rental expenses
If you renovate "the rental" but use the new oven yourself when you stay there, the deduction gets complicated. A separate bank account and clear records solve this.
5. Forgetting occupancy taxes
If Airbnb doesn't collect occupancy tax in your area, you're personally on the hook — and it's often 10%+. Cities have started auditing aggressively. Check Airbnb's tax collection page for your specific city.
Frequently asked questions
Do Airbnb hosts have to pay taxes?
Yes, generally. Airbnb income is taxable as either rental income (Schedule E) or business income (Schedule C). The exception is the 14-day rule: if you rent your primary home for fewer than 15 days in a year, the income is tax-free.
What is the 14-day rule for Airbnb hosts?
If you rent your primary residence for 14 days or fewer in a calendar year, the rental income is completely tax-free and you don't have to report it. You also can't deduct rental expenses in this case.
Schedule E or Schedule C — which do Airbnb hosts file?
Most hosts file Schedule E (passive rental income — no self-employment tax). However, if you provide substantial services like daily cleaning, meals, or concierge service, you must file Schedule C (active business — subject to self-employment tax of 15.3%).
Does Airbnb send a 1099?
Airbnb sends a 1099-K to hosts who exceed the federal threshold ($2,500 in 2025, down from $5,000 in 2024) or applicable state thresholds. The form goes to both you and the IRS. You're required to report all rental income whether or not you receive a 1099.
Can Airbnb hosts claim depreciation?
Yes. The structure of your rental property (not the land) can be depreciated over 27.5 years for residential properties. On a $300,000 building, that's about $10,900 in annual depreciation deductions. Furniture and appliances are depreciated over 5–7 years.
The bottom line
Airbnb hosting is one of the more tax-favored side hustles in the US — but only for hosts who actually know the rules. The 14-day rule, depreciation, the choice between Schedule E and C, and the deduction for shared home expenses can dramatically change what you owe. Hosts who file simply ("here's my Airbnb income, here's the tax") almost always overpay.
Track every expense. Calculate depreciation. File Schedule E unless you actually provide substantial services. And if you have any liability exposure (most hosts do), seriously consider an LLC.
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