Deductions/Depreciation and Personal Use: How Taxes Really Work for Airbnb Hosts

If you host on Airbnb or any short term platform, the tax rules can feel confusing fast. Is your place a business, a rental, or just a side gig. What can you deduct. How does depreciation work. And what happens if you also stay there yourself a few weekends a year.

This guide walks you through how taxes really work for Airbnb hosts, with a clear focus on deductions, depreciation, and personal use. By the end, you will know the key rules, what to track, and where tools like Rentastic can make your life much easier.

1. How the IRS sees your short term rental

Before you can apply any tax rules, you need to know how the IRS looks at your property and your activity.

At a high level, there are three big buckets:

1. A tax free personal place you rent very occasionally
2. A rental property with deductions and depreciation
3. A business that might also trigger self employment tax

Short term rentals sit in a gray area between hotels and long term rentals. The IRS treats many short term rentals more like a hotel, so they follow commercial style depreciation schedules and face extra wrinkles on local taxes and reporting (Rentastic).

The 14 day rule: when income is tax free

The first key concept is the 14 day rule.

If you:

• Rent the property for fewer than 15 days during the year, and
• Use it personally for the rest of the time

then:

• You do not have to report the rental income at all
• You cannot take any rental deductions

This is a clean, simple corner case. If you only rent your lake cabin for one popular festival weekend, you might be able to skip rental reporting entirely. Once you hit 15 rental days or more, this exception disappears and all your rental income becomes reportable (Rentastic).

Short term vs long term in the tax rules

The IRS draws a line between short term rentals and classic long term leases.

• Long term rentals (typically a lease of one year or more) are treated as residential rental property. They follow a 27.5 year depreciation schedule, and the reporting is generally simpler and more stable year to year (Rentastic).
• Short term rentals, where guests stay less than a month on average, look more like hotel stays. The IRS usually applies a 39 year depreciation schedule, similar to commercial property, and you also have to think about local lodging and occupancy taxes (Rentastic).

Knowing which side you fall on affects your write offs, your depreciation, and your long term tax planning. It also helps you interpret official guidance like the core tax rules around depreciation and local lodging taxes.

2. What counts as rental income and when you must report it

Once you cross that 14 day threshold, the IRS expects to see every dollar of your Airbnb income.

Short term rental income is considered ordinary income. That means it gets added to your other earnings, such as salary or business profits, and taxed at your normal income tax rates (Rentastic Blog).

You must report all Airbnb income

You have to report all rental income as gross income, even if Airbnb or another platform never sends you a tax form. This includes:

• Nightly rates
• Cleaning fees paid by the guest
• Any additional guest charges or upsells

Airbnb hosts must do this regardless of whether the platform issues a Form 1099 or any year end tax summary (Rentastic).

If you do not submit a W 9 when asked, the platform may withhold a flat 28 percent of your payouts and send that to the IRS as backup withholding (Rentastic). That hurts your cash flow and is usually easy to avoid by completing your tax profile early.

Local occupancy and lodging taxes

On top of federal income tax, your city or state might have:

• Transient Occupancy Tax
• Lodging Tax
• Hotel or bed tax
• Sales tax on stays

Sometimes Airbnb will collect and remit some of these on your behalf. Sometimes it will not. Even if the platform handles some taxes, you are still responsible for understanding your local rules and filing any additional forms needed (Rentastic).

This is where staying on top of your local tax rules and reading Airbnb’s help pages for your region really matters.

3. Deductions that can lower your Airbnb tax bill

Once you are reporting income, the good news is you can usually deduct a long list of legitimate expenses. These tax deductions reduce your taxable income and can significantly soften the sting of taxes.

Short term rentals offer a variety of deductions that can reduce taxable income, especially for cleaning, maintenance, and operating costs (Rentastic).

Common deductible expenses include:

• Cleaning and turnover services
• Consumables like toiletries, coffee, and linens
• Repairs and routine maintenance
• Utilities such as electricity, gas, water, internet
• Property management or co hosting fees
• Airbnb and payment processing fees
• Insurance related to the rental
• Property taxes and some travel to manage the property

If the property is used only as a rental, these are straightforward business expenses.

If you also use the place personally, you have to allocate these costs between personal and rental days. You can only deduct the rental portion.

For example, if the property is rented 120 days and used personally 60 days, then 120 out of 180 days, or two thirds of certain shared expenses, can be deductible.

The IRS expects you to keep meticulous records of income, expenses, and the number of days used for each purpose so you can support those allocations in case of questions (Rentastic).

4. Depreciation basics for Airbnb hosts

Depreciation is one of the most powerful tax rules in real estate. It turns the slow wear and tear on your property into a yearly deduction that reduces your taxable rental income.

Depreciation provides a yearly tax deduction that lowers taxable income by spreading the cost of the building and certain improvements over its useful life (Rentastic).

How residential vs short term depreciation works

For a pure long term residential rental, the IRS generally allows you to depreciate the building over 27.5 years. If your building (land excluded) is worth 275,000 dollars, you get about 10,000 dollars per year in depreciation expense (Rentastic).

For many short term rentals, the IRS treats the property more like a hotel or commercial building. In that case, you typically depreciate over 39 years instead of 27.5 years (Rentastic). That means a smaller annual deduction for the same building value, but potentially more flexibility with advanced strategies.

The key is that depreciation does not involve cash out of pocket each year. It is a paper expense, but it has real impact because it shelters some of your rental income from tax.

Accelerated depreciation and cost segregation

If you want to front load more of your deductions, you may be able to:

• Use accelerated depreciation methods on certain components
• Run a cost segregation study that breaks your property into pieces with different lifespans

With cost segregation, you do not just depreciate one big number over 39 years. Instead, you separate items such as flooring, appliances, furniture, site improvements, and more. Some of these may qualify for faster write offs or even immediate expensing under current rules.

Using accelerated depreciation techniques and cost segregation studies, short term rental owners can maximize deductions early in ownership, improve initial cash flow, and increase tax benefits (Rentastic).

These strategies are more complex and typically worth exploring with a tax pro who understands tax rules for real estate investors.

Depreciation and selling later

One important point. Depreciation is great while you hold the property, but when you sell, the IRS may look to “recapture” some of that depreciation and tax it at different rates.

The fact that short term rentals are treated more like hotels than classic long term rentals affects not only the depreciation schedule but also how tax works when you exit the investment (Rentastic).

That is another reason to keep clean depreciation records and to plan ahead with your CPA instead of winging it.

5. Repairs vs improvements: why the label matters

Not all property spending is created equal in the eyes of the IRS.

Tax planning for short term rentals involves distinguishing between repairs and improvements since they affect depreciation schedules differently (Rentastic).

• Repairs fix something broken and bring it back to its previous state. Think patching a roof leak, repainting scuffed walls, or swapping a broken lock. These can often be deducted in the year you pay for them.
• Improvements increase the value of your property or extend its useful life. Think adding a deck, gut renovating the kitchen, or finishing a basement to create another bedroom. These usually need to be capitalized and depreciated over time.

For an Airbnb, it might be tempting to treat every upgrade as a repair. That rarely holds up under scrutiny. You want to be accurate, because mislabeling can cause problems if there is an audit.

When in doubt, document the work with photos, invoices, and notes, then consult a tax professional or your accountant so you stay inside the rules while still maximizing legitimate write offs.

6. Personal use and mixed use properties

Life gets more complicated, and more interesting, when you both host guests and stay at the property yourself.

The IRS has specific rules for “mixed use” properties where personal days and rental days are intertwined.

Rentals used for more than 14 days and occupied personally for fewer days qualify as rental properties under IRS rules. That status lets you claim various expense deductions on your tax return, as long as you track the split carefully (Rentastic).

Tracking days is not optional

For mixed use, you must:

• Track every rental day
• Track every personal day
• Keep receipts and logs that tie your expenses and your calendar together

Hosts who mix personal and rental use need meticulous records to satisfy IRS scrutiny and ensure correct tax treatment (Rentastic).

Your percentage split between personal and rental days determines how much of your shared expenses and depreciation you are allowed to deduct.

For example, if you rent the property for 200 days and stay there yourself for 40 days, then:

• 200 out of 240 days, or about 83 percent, may be treated as rental use
• That 83 percent applies to many of your shared expenses and your depreciation

This allocation can change year by year, so you cannot just set it once and forget it.

Personal use and the vacation home rules

If your personal use is relatively high compared to rental use, special vacation home rules can limit how much loss you can claim or how much of your expenses you can deduct against other income.

You will not always run into these limits, but if your Airbnb is also your favorite getaway, it is worth reviewing the detailed tax rules or asking your CPA to walk through the vacation home tests with your actual numbers.

7. Short term vs long term rental tax differences in practice

You might be weighing whether to stay focused on Airbnb style guests or shift a unit to a long term tenant. From a tax angle, here is how they compare.

Long term rentals, generally leases over one year, involve simpler tax reporting that focuses on rental income and related deductions under residential rules. You get the 27.5 year depreciation schedule, and you usually do not deal with occupancy taxes or intense swings in personal use (Rentastic).

Short term rentals involve:

• Reporting all short term rental income as ordinary income, even if it is occasional (Rentastic Blog)
• Handling local lodging and occupancy taxes, which may change city by city (Rentastic)
• Using a 39 year depreciation schedule in many cases, with more room for advanced cost segregation strategies (Rentastic)
• Tracking a more complicated pattern of personal and rental use

Neither path is automatically better. The right choice depends on your income goals, your tolerance for complexity, and the market you operate in.

What is consistent across both is the need to keep detailed records, respect the core tax rules, and use available deductions smartly.

The more accurate your records, the more confident you can be when claiming every dollar you are legally entitled to deduct.

8. Why strong records and tools matter

Good tax outcomes start with good data. Property owners are advised to keep meticulous records of all rental income and expenses, separate personal and rental finances, track depreciation, and meet tax deadlines to avoid fines and maximize deductions (Rentastic).

Manual spreadsheets can work for a single studio. Once you manage multiple listings or properties, they become a liability.

How software like Rentastic helps

Property management and accounting tools can automate a lot of the grunt work that tax rules demand.

Rentastic, for example, can:

• Integrate with your bank accounts and platforms to automatically track income and expenses, which simplifies tax preparation and helps you stay compliant with IRS rules for both short term and long term rentals (Rentastic Blog)
• Generate automated Profit and Loss reports, so you always know how your rentals performed each month or year (Rentastic)
• Provide asset tracking tools and detailed depreciation schedules, which help you calculate deductions and plan for future purchases or exits (Rentastic)
• Offer digital receipt management so you can store proof of every expense in one place (Rentastic)

Automated financial reporting through platforms like Rentastic can reduce tax preparation times for rental owners from days to seconds and improve accuracy in meeting tax obligations under current IRS standards (Rentastic Blog).

Software is not a substitute for a qualified tax professional, but it gives them better data and frees you to focus more on guests and growth.

9. Next steps to stay compliant and keep more of your income

You do not need to become a tax expert to run a profitable Airbnb or short term rental, but you do need a basic grip on the tax rules that matter most:

1. Know whether you qualify for the 14 day rule or must report all income.
2. Understand if your property fits the short term or long term bucket for depreciation.
3. Track every rental day, personal day, and expense with enough detail to support your return.
4. Separate repairs from improvements so you do not misstate deductions.
5. Use depreciation and, where appropriate, accelerated methods to manage cash flow over time.
6. Stay on top of local lodging and occupancy taxes, not just federal income tax.
7. Use tools and advisors that understand real estate and short term rental specifics.

If you put in a bit of structure now, your future self will thank you when tax season feels like a quick review instead of a scramble.