Summary of What This Blog Covers:
- Discover the Top 10 Tax-Deductible Expenses for Short-Term Rentals
Learn which operating costs from depreciation and mortgage interest to cleaning services, marketing fees, and capital improvements, can lower your tax bill and maximize your rental income. - Understand the Tax Rules That Apply to Real Estate Investors
Explore how to properly classify expenses, track depreciation, comply with 1099 and W-9 requirements, and stay ahead of IRS regulations like FBAR filing and self-employment tax reporting. - Avoid Costly Tax Mistakes and Missed Deductions
Get expert insight into the difference between repairs vs. improvements, how to allocate mixed-use expenses, and how to optimize deductions through proactive planning and accurate recordkeeping. - Get Professional Support from Austin’s Trusted CPA Firm
Insogna CPA helps short-term rental owners simplify their accounting, stay compliant, and build profitable, tax-efficient rental businesses with concierge-level service and strategic guidance.
You’re not just hosting travelers. You’re running a business. A real one. One with income, overhead, customer service issues, platform fees, and yes, a whole stack of tax responsibilities.
But if you’re not tracking your deductible expenses with precision, you’re doing your rental business a disservice. And you’re likely handing the IRS more of your hard-earned income than necessary.
At Insogna CPA, one of the top Austin CPA firms, we specialize in helping short-term rental owners like you run their properties like true businesses with accurate books, tax-efficient strategies, and real-time insights that make growth not only possible, but predictable.
This guide is built to help you do just that. Whether you’ve got one property or several, whether you manage them yourself or outsource it all, we’ll show you exactly which deductible expenses you should be tracking to reduce your tax burden, stay compliant, and increase your profits year after year.
Why Tracking Your Deductions Matters
First, a quick gut check: Do you treat your short-term rental like a business or like a side hustle?
Because the IRS definitely sees it as a business. That means you need a system that captures income and expenses, separates personal and business activity, issues the right tax forms (think 1099-NEC and W-9 forms), and follows rules on depreciation, asset tracking, and potential FBAR filing if you’re earning income internationally.
That’s a lot. But every piece matters.
If you’re audited and your deductions aren’t well-documented, you risk losing them. And if you’re not claiming them at all? You’re simply overpaying in self-employment tax and federal income tax.
1. Property Depreciation
Why it matters: This is one of the largest tax deductions available to real estate investors.
The IRS lets you depreciate the value of your rental property (excluding the land) over 27.5 years. So if your rental property is worth $300,000 (excluding land), you can deduct roughly $10,909 in depreciation per year.
But it gets more nuanced:
- If the property was previously used personally, depreciation starts when you convert it to rental use.
- You can also depreciate certain capital improvements (more on that later).
- And if you’re doing a 1031 exchange, depreciation recapture becomes a big consideration.
Need help getting the math right? We’ll handle your depreciation schedules and ensure every number lines up.
2. Mortgage Interest
Why it matters: One of the most straightforward and impactful deductions, especially in high-interest-rate environments.
If you’re financing your property, the interest portion of your mortgage is deductible. This is considered a necessary expense for generating rental income and is separate from the property’s depreciation.
Be careful: If you live in the property part of the year, the deduction needs to be prorated between personal and rental use.
What we do for clients: We make sure this interest is reported properly on Schedule E and reflects accurate rental activity across platforms like Airbnb or Vrbo.
3. Utilities
Why it matters: Utilities are often overlooked or lumped in incorrectly.
Electric, gas, water, Wi-Fi, trash collection, every one of these qualifies as a deductible operating expense when they’re tied to your short-term rental activity. If you rent a portion of your primary residence (like an attached unit), you’ll need to allocate the expenses accordingly based on square footage or usage.
Also deductible:
- Smart home subscriptions (e.g., Ring, Nest)
- Cable TV or streaming services offered to guests
- Internet and router hardware
We track and allocate these automatically through QuickBooks Self-Employed or QuickBooks Online, so your deductions don’t depend on guesswork.
4. Repairs and Maintenance
Why it matters: Repairs are deductible immediately; improvements are not.
A broken sink? Deduct it. HVAC service? Deduct it. Repainting the walls? You guessed it.
The catch: The IRS draws a clear line between “repairs” (restoring an item to working condition) and “improvements” (enhancing or upgrading something). Improvements must be depreciated over time.
We help clients distinguish between the two, so you don’t make costly classification errors that could trigger penalties.
5. Furniture and Appliances
Why it matters: These assets can be deducted in full or depreciated based on their cost.
Beds, mattresses, kitchenware, coffee makers, couches, TVs, and even light fixtures, these are all deductible expenses when they’re used in your rental property.
Under Section 179, you can often deduct 100% of the cost in the year you purchase it (if eligible). Otherwise, they may be depreciated over 5–7 years.
We advise clients on when to expense vs. depreciate, depending on their income level and tax strategy.
6. Cleaning, Landscaping, and Guest Prep
Why it matters: Essential for your guest experience and fully deductible.
Whether you’re paying a professional service or doing it yourself, these costs count. You can also deduct:
- Supplies like paper towels, toilet paper, and cleaning sprays
- Lawn mowing or snow removal services
- Pool and spa maintenance
Mileage and gas for your own trips to the property are deductible, too. Just make sure you’re tracking it all with logs or receipts.
7. Insurance
Why it matters: Your personal homeowners insurance usually doesn’t cut it.
Short-term rental insurance often includes:
- Business interruption coverage
- Liability protection
- Coverage for guest damage
These premiums are fully deductible, as are supplemental liability policies, umbrella coverage, or landlord insurance.
8. Marketing and Platform Fees
Why it matters: The platforms take their cut. Make sure you’re claiming it.
Airbnb and Vrbo both charge hosting fees. If you’re running ads on Facebook, Google, or Instagram or paying a photographer for those drool-worthy listing shotsall, of that is deductible.
Other deductions here:
- Booking platforms like Lodgify, Hostaway
- Virtual assistants or listing managers
- Channel manager software
We track these as marketing expenses in your books and make sure your 1099-K (from platforms) aligns with deductions.
9. Business Travel
Why it matters: If you’re visiting your property for management, maintenance, or improvements, it’s deductible.
Airfare, hotel, rideshare, rental cars, meals, if it’s for business purposes, it can be deducted. But there’s a caveat: you must prove that the trip’s primary purpose was business.
We help you document the purpose and duration properly, especially when you blend personal and business travel in one trip.
10. Capital Improvements
Why it matters: You can’t deduct them immediately, but they save you thousands over time.
This includes:
- Roof replacements
- Kitchen or bathroom remodels
- Structural additions
- New flooring or fencing
These are depreciated over multiple years but offer substantial long-term value. Tracking them accurately (with dates, costs, and photos) is critical especially if you plan to pursue a 1031 exchange or sell the property.
Bonus: Contractor Payments, 1099s, and Compliance
If you pay contractors more than $600 a year, you’re required to file a 1099-NEC and collect a W-9 form from them first.
Mess this up, and you could face penalties.
At Insogna CPA, we handle 1099 tracking and filing for our clients automatically. No more scrambling at year-end or wondering who you paid and when.
Let’s Build Your Tax Strategy Together
If you’ve been searching for “CPA near me” or “tax services near me” and still feel overwhelmed, we’ve got you.
Let’s simplify your financials, automate the admin, and maximize your profit. Because you weren’t meant to do this alone.
Contact Insogna CPA today to schedule a discovery call and let’s make your short-term rental business more profitable, less stressful, and way more fun to run.