A Guide to Reporting Vacation Rental Income on Your Taxes

Where vacation rental income is reported

Rental income from a vacation or short-term rental property is generally reported on Schedule E, the same form used for traditional long-term rentals. Income includes rent collected, and often cleaning fees or other charges passed to guests, while allowable expenses include mortgage interest, property tax, insurance, utilities, cleaning and maintenance, and depreciation.

The personal use test that changes everything

How the property is treated depends heavily on personal use. If you rent the property for 14 days or fewer during the year, the income generally isn't taxable at all, and you don't deduct rental expenses, this is sometimes called the "Master's exception," though it applies broadly, not just near golf tournaments. If you rent it for more than 14 days, the property is treated as a rental, and if you also use it personally for more than 14 days or more than 10% of the days it's rented, whichever is greater, additional limitations apply to how much expense you can deduct.

Allocating expenses between rental and personal use

When a property is used both personally and as a rental, expenses generally need to be allocated between the two based on the number of days used for each purpose. This allocation affects how much of your mortgage interest, property tax, utilities, and other costs can be deducted against rental income versus treated as personal, non-deductible expenses.

Platforms, 1099-Ks, and what gets reported to the IRS

If you rent through platforms like Airbnb or Vrbo, you may receive a 1099-K reporting the gross payments processed through the platform. This figure often includes cleaning fees and platform fees that were passed through, not just your net rental income, so it's worth reconciling the 1099-K against your own records rather than reporting the 1099-K figure directly as income.

Depreciation is easy to overlook

Rental property is generally depreciated over time, which can meaningfully reduce your taxable rental income. It's also one of the more commonly missed deductions for people managing their own rental returns, since it doesn't correspond to an actual cash expense during the year and is easy to forget without a system tracking it.

This article is for general informational purposes and isn't personalized tax advice. Tax rules and thresholds change from year to year, confirm current figures with your preparer or directly at IRS.gov and nj.gov/treasury/taxation before filing.