New York State, specifically New York City, was once a thriving hub for investors owning short-term rentals and for the online platform Airbnb. In recent years, politicians have targeted the short-term rental (STR) business as one of the culprits of the housing shortage, passing laws requiring hosts to register their properties with the Office of Special Enforcement.

In this guide, we’ll explain the new rules for property owners who want to rent out vacation rentals and cover deductible expenses.

What’s considered a short-term rental?

Generally, a home, room, or apartment rented for 30 days or less is considered short-term. In New York City, all hosts must register their properties with the city’s Office of Special Enforcement, which limits the rental period for guests to a maximum of 30 consecutive days. However, the short-term rental host must live in the same space and have no more than two guests.

In New York City, long-term tenants and building owners can’t rent the entire home or apartment to visitors without a host for less than 30 days. If hosts rent outside these rules, they are operating illegally.

Each city has its own specific rules. It’s essential for hosts to stay informed about the ordinances of each region where they own a vacation rental property.

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

The deadline to file and settle your taxes is April 15, 2024. New York offers a six-month extension during tax season.

The extension date is October 15, 2024. A taxable rental income includes all earnings from renting a room, apartment, or home.

Homes and apartment buildings can generally use Form 1040 to report their rental property income.

Do I always need to report rental income?

All investors must report their rental income to the IRS, but there’s an exception to that rule. If you rent out your apartment, unit, or place for less than 14 days annually, your rental income is tax-free; otherwise, you must report your income.

All hotel rooms, bed and breakfasts, and some apartment buildings are subject to a tax called the Hotel Room Occupancy Tax. This tax is charged for staying in a room, whether one night or longer, and is paid by the occupant and collected by the host. It applies to all types of short-term housing. The rental property owner must then pay those taxes to the IRS.

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

To begin, organize your documentation of rental activity, including the dates you rented your space and any services, maintenance, and repairs provided. Use Schedule E (Form 1040) to report rental income on all your properties.

The following information offers simple steps to report your short-term rental income.

Step 1: Gather the proper forms

Collect all pertinent information on your rental. You can report all of your expenses on your 1040 form, and if you have multiple properties, complete as many Schedule E 1040 forms as needed.

For details on how to file a Schedule E, check out our step-by-step guide.

Here is an essential list to have on hand when filing:

• Real estate investment financial statements
• Relevant receipts with dates for payment, repairs, maintenance, and services
• Official documents supporting expenses, if applicable
• Detailed deductible expenses

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

Many real estate investors choose to list their spaces on online platforms like VRBO or Airbnb, where they can reap the benefits of tax deductions on operating expenses. When filing your income taxes, determine whether your investment property is earning an active or passive income.

The fundamental difference between active and passive income is that active income is earned through a job you actively work at, and passive income is earned through an investment that earns profits with little effort on your part. So, if you spend at least 100 hours yearly on the STR, you can deduct losses from your rental business.

Some rental-related losses include:

• Repairs
• Cleaning
• Advertising
• Maintenance

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

Ideally, if you have access to a tax professional, like an accountant or real estate attorney, seek guidance to ensure you’re not missing any important details and can maximize deductions for your vacation rental business.

While the IRS recommends using the 1040 form to report your taxes, TurboTax suggests using the W-9 form on STR properties to collect information from platforms like Airbnb before filing your taxes. If you don’t provide online platforms, like Airbnb or VRBO, with a W-9, they may be required to hold 28% of your rental income profits. Once you file with a W-9, the online rental business will give you access to the full amount.

Here is a quick breakdown of the difference between a 1040 and a W-9:

• W-9 is a form that can be used by businesses or property managers
• W-9 gets the information needed to report your taxes—you are giving your information to a venue that is paying you
• 1040 tells the government how much money you earned

Key tax deductions for short-term rentals

Some rental deductions from your STR in The Big Apple will include maintenance fees. If you actively conduct routine maintenance tasks on the property including regular cleaning, and repairs, these costs may be deducted. 

If you hire a property manager to do the work, those expenses are also deductible. These deductions can help you save money on your taxes, so it’s essential to keep an organized record of your rental-related costs.

Here are the essential operation costs to keep track of: 

• Cleaning
• Maintenance
• Repairs
• Updates for natural wear and tear

In most cases, property taxes, mortgage interest rates, and insurance fees are deductible.

FAQ: New York rules and taxes on short-term rental properties