As a short-term rental (STR) owner, you’re always looking for ways to increase profits and reduce expenses. One of the best ways to keep more of your hard-earned money is to maximize tax deductions for your short-term rental – but doing it the right way is key to avoiding an audit.
Claiming every deduction you’re entitled to can save you thousands of dollars, but mistakes in tracking expenses or categorizing deductions can put you on the IRS’s radar.
In this article, I’ll break down the top tax deductions STR owners should claim, common audit triggers to avoid, and how to set up your bookkeeping for stress-free tax filing.
1. Deductible Expenses Every STR Owner Should Track
The IRS allows STR owners to deduct ordinary and necessary expenses related to managing and maintaining their rental property. The key is that they must meet that definition or being both 1) ordinary expenses and 2) necessary expenses for your business type. Here are the key deductions you shouldn’t miss:
📌 Key STR Tax Deductions
- Mortgage Interest & Property Taxes – This is a big one so be sure to deduct interest paid on your mortgage and property tax payments.
- Utilities & WiFi – If you cover electric, water, gas, internet, or streaming services for guests, these are deductible.
- Cleaning & Maintenance – Housekeeping and cleaning fees, handyman repairs, and landscaping services count as expenses,
- Supplies & Furnishings – Linens, towels, furniture, kitchenware, and guest amenities are all deductibles so keep track.
- Advertising & Listing Fees – Airbnb, Vrbo, and other direct booking STR listing platform fees.
- Legal & Professional Fees – Accountant fees, attorney costs, and bookkeeping software.
- Depreciation – This is a big one so make sure to spread out the cost of your property, appliances, and furniture over time for tax savings.
- Travel Expenses – If you visit your STR for business purposes, airfare, mileage, lodging, and meals may be deductible.
- Home Office Deduction – If you manage your STR from a dedicated workspace at home, you may qualify for this deduction as well.
🚀 Pro Tip: Keep a separate business bank account and business credit card for each STR to track deductible expenses easily.
2. Common Audit Triggers STR Owners Should Avoid
While maximizing deductions is key to saving money, certain red flags can increase your chances of an IRS audit. Be mindful of these common triggers:
- ❌ Claiming Personal Expenses as Business Expenses – Mixing personal and rental expenses can lead to major issues. Keep separate financial accounts for your STR.
- ❌ Overstating Your Deductions – Only deduct expenses directly related to the rental property. Excessive deductions compared to income can raise suspicion.
- ❌ Failing to Report Rental Income – Platforms like Airbnb & Vrbo report rental income to the IRS via Form 1099-K, so make sure your reported income matches.
- ❌ Not Keeping Proper Records – The IRS may ask for documentation to support your deductions and it is up to us to justify that they truly had an ordinary and necessary business purpose. Keep digital copies of receipts and track expenses in QuickBooks Online.
🚀 Solution: Use bookkeeping software to categorize deductions correctly and generate accurate financial reports.
3. Best Bookkeeping Practices to Maximize Tax Deductions for Your Short-Term Rental
Tracking expenses properly throughout the year will make tax season a breeze. Here’s how to stay organized and audit-proof:
- Use QuickBooks Online – Sync your bank accounts, credit card accounts, and STR listing platform payouts to automatically track income and expenses.
- Categorize Expenses Correctly – Set up custom categories in QuickBooks to match IRS-approved deductions.
- Keep Digital Receipts – Store receipts in QuickBooks or a cloud folder for easy access.
- Review Financial Reports Monthly – Run a Profit & Loss Statement, Balance Sheet, and Cash Flow Statement to monitor income and expenses.
- Work with a Tax Professional – STR tax laws change frequently – ensure that your tax preparer understands real estate and short term rentals to ensure compliance.
💡Pro Tip: Want a plug-and-play bookkeeping system designed specifically for STR owners? My QuickBooks Setup Course for STR Owners walks you through everything step by step!
Final Thoughts: Save Thousands on Taxes While Staying IRS-Compliant
By tracking the right deductions, avoiding audit triggers, and using proper bookkeeping, you can save thousands on taxes while keeping your STR finances stress-free.
📌 Next Steps: Get Your STR Finances in Order with My QuickBooks Setup Course! Want a plug-and-play system for STR bookkeeping? Join my QuickBooks Setup Course for STR Owners and get organized in just 2 days!
👉 Enroll Now and take control of your rental finances!
Helpful External Resources
🔗 IRS Guide on Rental Income & Deductions
🔗 QuickBooks Online for STR Owners