How Tax Laws Affect Airbnb and Other Short-Term Rental Hosts

If you rent out your property short-term through an online rental service like Airbnb, Vrbo, or others, you need to know how tax laws affect you. Fortunately, recent changes in tax laws are mostly good for short-term rental hosts.

Here are some ways the law has changed for hosts.

1. The 20% Pass-Through Tax Deduction

The Tax Cuts and Jobs Act (TCJA) created a new tax deduction for individuals who earn income from businesses owned individually or by pass-through entities, such as limited liability companies or partnerships, which includes almost all short-term rental hosts. The One Big Beautiful Bill Act made this deduction permanent.

If your short-term rental activity qualifies as a business for tax purposes, as most do, you might be eligible to deduct up to 20% of your net rental income from your income taxes. This is in addition to all your other rental-related deductions. (I.R.C. § 199A (2025).)

You don't have to spend any additional money or buy any new property to qualify for this deduction. How much you'll be able to deduct, however, depends on your taxable income and how much you earn from your rental activity. For higher-income taxpayers, the deduction is limited.

2. Writing Off Expenses is Easier

When you buy personal property, such as new furniture or appliances, for your rental activity, you get to write off all or part of the cost as a rental expense. As of January 2025 and later, hosts can use 100% bonus depreciation (the percentage is less in previous years) to write off in a single year the full cost of long-term personal property they use for their rental business. Bonus depreciation may now be used for both new and used personal property. It may not be used for real property.

Hosts can also use a provision of the tax code called "Section 179" to deduct in one year up to a specified limit of personal property purchased for rental units. However, Section 179 may be used only for property that is used over 50% of the time for the rental activity, which limits its use by many short-term hosts who live in their property a majority of the time.

3. Limits on Property Tax and Mortgage Interest Deductions Don't Apply

Tax law limits the personal mortgage interest deduction to interest on $750,000 of acquisition indebtedness, a reduction of $250,000 from the prior law, which permitted interest to be deducted on up to $1 million. The itemized personal deduction for real property taxes is limited to a maximum of $40,000 (2025). The cap increases by 1% each year from 2026 through 2029, then goes down to $10,000 for tax years starting in 2030. Under prior law, there was no limit on this deduction.

The limits on the personal itemized deductions for home mortgage interest and property taxes don't apply to rental businesses. So, the portion of a rental host's mortgage interest and property tax allocated to the short-term rental activity doesn't come within the limits. These are rental deductions, not personal itemized deductions.

4. No Deductions for Rentals That Are Hobbies

Under prior law, expenses from a hobby could be deducted as a personal itemized deduction on IRS Schedule A to the extent they exceeded 2% of the taxpayer's adjusted gross income. However, these deductible hobby expenses couldn't exceed hobby income.

Recent tax laws completely removed the personal deduction for hobby expenses. This means that while the income from a rental activity classified as a hobby must be reported and tax paid, no expenses may be deducted.

The vast majority of rental activities qualify as businesses or investment activities. However, rentals that are not profit-motivated must be classified as not-for-profit activities or hobbies.

5. Lower Income Taxes Due on Rental Profits

Almost all short-term hosts pay income tax on their rental profits at their individual tax rates. The TCJA reduced individual income tax rates for almost all taxpayers, and the One Big Beautiful Bill Act permanently reduced them. So, you'll pay less tax on your profits in 2018 and later.

Get More Information

For more details on taxes for short-term rental hosts, refer to Every Airbnb Host's Tax Guide, by Stephen Fishman (Nolo). If you need further assistance, talk to a tax professional, such as a certified public accountant or a tax attorney. A tax professional can prepare tax returns or provide tax information, guidance, or representation before the IRS.