It’s a question that keeps many awake at night – “Should I own a short-term rental property and list it with Vrbo®, Airbnb®, or another site?”  Hopefully you’re sleeping well these days, but many people either toy with the ideas of purchasing a short-term rental property or converting the traditional rental property to a short-term rental property and listing it with Airbnb® or Vrbo®.

As you do the math and dream about the possible extra revenue opportunities from owning a short-term rental property, please also throw taxes into the equation.  And did you know that owning short-term rental properties may cause you to pay more in taxes?  Not fun.  This additional tax is self-employment tax (Social Security and Medicare taxes).

As the owner of a short-term rental property, you wear the hat of a hotel owner . . . not the hat of a landlord who is consistently renting out a property in a long-term arrangement.  The IRS has issued publications indicating that if the average stay in your property is seven days or less, you are a quasi-hotel owner and must pay self-employment taxes on your profits (revenues minus expenses) if you are set up as a sole proprietor.

There are many expenses, though, that can help reduce or eliminate profits.  We’d be happy to explain more and help you in your decision to jump on the bandwagon of owning such a property.