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A Guide to Short-Term Rental Tax Deductions in Virginia

Key Takeaways

  • In Virginia, the statewide sales tax is 5.3% in most places. The transient occupancy taxes are 9.5% total.
  • If you're operating a short-term rental business, you can claim deductions on your earnings, including rental activity and property taxes.
  • Vacation property owners must have the correct permits from the Virginia Department of Health (VDH) and maintain a habitable rental unit or home.

Published on May 9, 2024 | Updated on May 9, 2024

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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

On May 1, 2021, the transient occupancy tax, or lodging tax, increased by 3% in Virginia. The total tax you pay 9.5% of the room rental charge, plus an extra $1.25 for each room per night. The sales tax rate for the majority of locations in Virginia is 5.3%.

In Virginia, you are responsible for collecting a lodging tax if you rent out a short-term rental. Each city harbors different rules, so you must familiarize yourself with local laws to ensure you abide by them. For example, in Norfolk, you must have a Registration Zoning Permit or Conditional Use Permit.

To keep everyone safe, owners of short-term rental properties in Virginia must follow the Virginia Department of Health rules. These rules ensure that the place is safe for people who stay there and for the neighborhood. Owners must ensure they have the right permits from VDH and follow all the regulations they’ve set.

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.

 

Learn more about resources in Virginia

Learn more about Taxes

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18. A Guide to Short-Term Rental Tax Deductions in Virginia
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  1. A Guide to Tax Deductions in Alaska for Short-Term Rentals
  2. Tax Guide on Short-Term Rental Properties in Arizona
  3. Understanding California Taxes on Short-Term Rentals
  4. Tax Guide on Florida’s Vacation Rentals
  5. Georgia Short-Term Rental Tax Guidelines
  6. A Guide on Short-Term Rental Properties in Hawaii
  7. Guide on Rental Property Tax Deductions in Illinois
  8. A Guide on Short-Term Rental Tax Deductions in Kentucky
  9. Your Guide to Short-Term Rental Tax Deductions in Maine
  10. A Guide to Short-Term Rentals in Michigan
  11. A Guide on Short-Term Rental Tax Deductions in New Jersey
  12. New York Rules and Taxes on Short-term Rental Properties
  13. Tax Guide for Nevada Short-Term Rentals
  14. A Guide on Taxes for Short-Term Rentals in North Carolina
  15. Tax Guide on Short-Term Rental Property Deductions in Ohio
  16. Short-Term Rental Tax Deductions in South Carolina
  17. Guide on Rental Property Tax Deductions in Texas
  18. A Guide to Short-Term Rental Tax Deductions in Virginia
  19. Washington State Tax Deductions on Short-Term Rentals
  20. A Guide to Short-Term Rental Tax Deductions in Wisconsin

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