A Guide to Short-Term Rental Tax Deductions in Virginia (2024)

Virginia attracts visitors from everywhere due to its thriving cultural scene mixed with its heritage, personifying the quintessential spirit of the American South.

If you own and lease vacation homes in Virginia, learn how to capitalize on tax deductions.

What’s considered a short-term rental?

Short-term rentals (STRs) are accommodations typically rented for fewer than 30 days. They cater to tourists or business travelers seeking temporary lodging and are usually found in online marketplaces like Airbnb and VRBO.

When should I report my rental income for my short-term rental?

In the U.S., the tax year runs from January 1 to December 31, with tax returns typically due by April 15. The Internal Revenue Service (IRS) taxes rental income, including from STRs. Rental property owners need to report their income accurately to avoid future audits. A tax professional can advise on whether additional forms, like a W-9 Form, are necessary for platforms like Airbnb and VRBO.

Do I always need to report rental income?

If STR guests lease your vacation rental properties for more than 14 days annually, you must report these earnings since the IRS deems STR earnings taxable income.

Under the 14-day rule, if the rental period is 14 days or less per year, you don’t have to report this rental income and can’t claim deductions.

How do I report rental income for my short-term rentals?

Use the Schedule E Form 1040 or the Form 1040-SR, tailored for individuals aged 65 and older. Consult our guide for a comprehensive overview of the rental income reporting process using the Schedule E 1040 Form, ensuring accurate information. This guide covers everything from income or loss from estates and trusts to real estate mortgage investment conduits.

Follow these three steps to help break down the process.

Step 1: Gather the proper forms

Having a written record of the time spent on repairs and maintenance, along with the associated costs for rental activity, is crucial. Make reporting easier by creating a list of itemized deductions to include on the 1040 Form.

Step 2: Determine if the structure of your business is active or passive

Determining whether income is passive or active hinges on how engrossed you are in managing and providing services for your guests. Passive income usually requires minimal day-to-day engagement, often through online booking platforms like Airbnb and VRBO. On the flip side, active income involves a more hands-on approach, when you invest significant effort to generate income from rentals.

Here are some examples of running a short-term rental business:

• Offering guest services
• Routine cleaning and maintenance
• Providing meals

Step 3: Reporting rental income with a Schedule E (Form 1040)

Report your earnings using the 1040 Form to itemize your deductible expenses. For those relying on Airbnb to promote their rental and collect and remit lodging taxes, submit a W-9 Form to Airbnb before sending the IRS your 1040. Sometimes, Airbnb will withhold 28% of your earnings if you don’t submit a W-9 Form.

Key tax deductions for short-term rentals

When it comes to short-term rentals in Virginia, hosts can benefit from several key tax deductions on their income tax returns to lower tax burdens and boost earnings.

These deductions may include:

• Mortgage interest
• Property taxes
• Depreciation
• Utilities and maintenance
• Insurance premiums
• Professional service, including property management, advertising, and marketing fees

FAQ: Short-term rental property tax deductions in Virginia

Our final thoughts

Renting out a short-term rental property can bring in good money, especially when you understand how to use tax deductions to your advantage. If you’re not sure about handling the long-term commitments of traditional rentals or the challenges of operating a short-term rental business, our guide can help you decide what suits you best.