What forms and reporting do short-term rental hosts need for taxes?

If you earn money by renting a home, condo, or spare room for short stays, federal tax rules require that you report that income and claim any related expenses on the appropriate IRS forms. Which forms you use depends on how you operate the rental (passive investment vs. a business that provides significant services), how many days you rent, and how much personal use the property receives. Below I explain the typical forms, when each applies, documentation best practices, and common traps to avoid.

Key IRS forms and when you’ll likely use them

  • Schedule E (Form 1040), Supplemental Income and Loss: The default place to report rental income and rental-related expenses when the activity is passive (you simply make the property available, do minimal services like key exchange or cleaning, and don’t materially participate). See IRS Schedule E guidance (IRS: About Schedule E).

  • Schedule C (Form 1040), Profit or Loss From Business: Use Schedule C when you provide substantial services to guests (daily cleaning, meals, concierge, or hotel-like amenities) or if your activity rises to the level of a trade or business and you materially participate. Income reported on Schedule C is subject to self-employment tax (Social Security and Medicare) in addition to income tax. See IRS guidance on Schedule C.

  • Form 1099-K, Payment Card and Third Party Network Transactions: Platforms issue Form 1099-K to report gross payments when they meet that platform’s reporting threshold. Historically that threshold had been $20,000 and 200 transactions; statutory changes and IRS guidance have affected reporting thresholds and timing, so always check the current year rules and the form you receive (IRS: About Form 1099‑K). Note: a 1099-K reports gross receipts, not net profit—do not assume it equals taxable income.

  • Form 4562, Depreciation and Amortization: Use this form to claim depreciation on residential rental property (MACRS, 27.5-year recovery for residential real property) and for depreciable personal property you place in service for the rental. Depreciation reduces taxable rental income over time (IRS: Form 4562 instructions).

  • Form 8582 and real estate passive activity rules: Rental activities are usually passive, and losses may be limited. Form 8582 may be needed to calculate allowable passive losses unless you qualify as a real estate professional or meet active participation exceptions (IRS Publication 925).

  • Form 8829 (Home office): Rarely used by hosts, but if you have a dedicated home office used exclusively for rental management and meet rules, some expenses may be allowable. Consult a tax pro before applying home office deductions to rental income.

Other filings and local reporting

  • Form 1040: Report net rental income (or loss) from Schedules E or C on your Form 1040.
  • State and local income tax returns: Rental income is usually taxable at the state level; rules and forms vary by state.
  • Transient occupancy taxes / local lodging taxes: Many cities and counties require hosts to collect and remit nightly occupancy taxes (also called hotel, lodging, or transient taxes). Many platforms collect and remit these automatically in some jurisdictions—verify your local rules.

How the 14- or 15-day rule works (“vacation home” exception)

If you rent your personal residence for fewer than 15 days during the year, federal tax rules generally allow you to exclude that rental income from your tax return entirely. You also cannot deduct rental expenses against excluded income. If you exceed the threshold, you must report rental income and apportion expenses between personal and rental use (IRS Publication 527).

Primary vs. rental use: allocating income and expenses

When you use a property partly for personal use and partly as a rental, you must divide expenses between rental and personal days. Common rules:

  • Direct rental expenses (advertising, platform fees, guest supplies, cleaning for guests) are fully deductible against rental income.
  • Shared expenses (mortgage interest, property taxes, utilities, HOA fees, insurance) are prorated by rental days vs. total days of use.
  • Depreciation applies only to the rental portion of the property and is computed using the rental basis and MACRS rules (27.5-year residential recovery period).

Document rental calendars, booking records, and receipts. Accurate day counts are the primary evidence for correct allocations.

When rentals become a business (Schedule C) and self-employment tax

You’ll file Schedule C and pay self-employment tax if your short-term rental activity rises to a business level by providing substantial services (examples: daily maid service, concierge, meal service, or regular transportation) or if you materially participate and hold yourself out as operating a hospitality business. The line between passive rental and business can be murky—factors include frequency of services, business-like operations (professional management, advertising), and your level of involvement. If in doubt, consult a tax professional.

Depreciation: how it reduces taxable income and what forms to use

Residential rental property uses the Modified Accelerated Cost Recovery System (MACRS) over 27.5 years. You claim depreciation beginning when the property is placed in service as a rental. Use Form 4562 to compute depreciation for the first year and to report special depreciation choices. Depreciation can create a carryforward basis when you sell the property—note depreciation recapture rules apply on sale.

Reconciling Form 1099-K and your books

A 1099-K reports gross payments processed by a platform. It may include fees collected on your behalf, refunds, or payments for non-rental items. You must reconcile the 1099-K totals to your own records and report taxable income accurately after allowable deductions. Keep a ledger or bookkeeping software export (monthly statements, payout reports) so you can explain differences if the IRS queries your return.

Passive loss limits and the real estate professional exception

Generally, rental losses are passive and offset only passive income. However, you may be able to deduct up to $25,000 of rental losses against nonpassive income if you actively participate and your adjusted gross income is below certain phase-out thresholds (special allowance phases out at higher incomes). If you qualify as a real estate professional and materially participate, rental losses may be treated as nonpassive. See IRS Publication 925 for details.

Common mistakes hosts make (and how to avoid them)

  • Treating 1099-K totals as taxable profit: reconcile, then deduct expenses.
  • Failing to allocate expenses for partial-year rentals or mixed personal use.
  • Not depreciating the structure when it should be depreciated (loss of future tax benefit).
  • Misclassifying business activity vs. passive rental and unexpectedly owing self-employment tax.
  • Ignoring local lodging tax and licensing requirements.

Avoid these errors by keeping a clear booking calendar, saving receipts, and using a separate bank account for rental proceeds and expenses.

Practical recordkeeping and documentation tips

  • Retain contracts, platform payout reports, 1099s, receipts, invoices, and bank statements for at least three years; seven years if you file claims for substantial refund or depreciation issues.
  • Use accounting software or a simple spreadsheet to track gross rental receipts, platform fees, cleaning and maintenance, utilities, and capital improvements.
  • Note the date each expense was incurred and whether it relates to rental or personal use.

Real examples (anonymized and instructive)

1) A part-time host who rented a room several weekends a year assumed the platform would handle taxes. The platform issued a 1099-K showing gross payouts, but the host had not tracked cleaning and supply costs. After reconciling, the host reduced taxable income significantly by documenting direct rental expenses and allocating a portion of utilities and mortgage interest.

2) A host who provided daily breakfast and concierge services was better classified as operating a hospitality business. We filed Schedule C for their returns; they paid self-employment tax but were able to deduct business startup and operating expenses that would not be allowed on Schedule E.

When to consult a tax professional

Engage a CPA or tax advisor if you:

  • Receive a 1099-K and aren’t sure which items are taxable.
  • Provide substantial services and need help deciding between Schedule E and Schedule C.
  • Have passive losses and want to evaluate real estate professional status.
  • Plan to form an entity (LLC or S corporation) for multiple properties.

In my practice, early planning—especially for hosts scaling to multiple properties—limits surprises and can save on taxes over time.

Helpful IRS resources and further reading

Internal resources on FinHelp

For readers who want more detail on choosing the correct tax schedule or related filing topics, see these FinHelp guides:

Professional disclaimer: This article is educational and does not replace individualized tax advice. Tax rules change and applications vary by facts—consult a qualified tax professional for guidance on your situation.

If you want, I can provide a short checklist you can use for year-end recordkeeping or a sample worksheet to allocate rental vs. personal days for one property.