The Ultimate First-Year Tax Checklist for Airbnb & Short-Term Rental Hosts
Launching a short-term rental (Airbnb, Vrbo, or direct-booking property) can be exciting — but the tax side often surprises new hosts. The good news is that with proper planning, you can significantly reduce your taxable income in the very first year of operation.
This guide outlines the first-year tax checklist we use for STR clients at Shahbaz & Associates CPAs.
1. Decide Your Tax Classification Early
Short-term rentals have unique tax rules:
- They can be treated as a rental activity
- Or as a business activity
- Which may allow losses to offset W-2 or other active income
Your classification determines your deductions, material participation thresholds, and whether the STR loophole applies.
2. Track Days Meticulously
You need accurate logs for:
- Guest stays
- Personal-use days
- Maintenance days
- Material participation hours
Good documentation is essential if you’re ever audited.
3. Capture All Startup Costs
Common deductible or depreciable startup costs include:
- Furniture
- Appliances
- Decor
- Initial supplies
- Marketing photos
- Listing setup fees
- Travel to inspect property
- Renovations prior to renting
Many of these can be immediately expensed or depreciated in year one.
4. Consider a Cost-Segregation Study
STRs often qualify for aggressive depreciation because they’re treated more like active businesses. A cost-seg study can provide massive first-year write-offs, especially when paired with bonus depreciation.
5. Understand Sales & Occupancy Taxes
Many cities and counties require hosts to collect or remit:
- Sales tax
- Transient lodging tax
- Local STR registration fees
Airbnb or Vrbo may collect these for you — but not always. Verify with your municipality.
6. Keep Clean Books From Day One
Separate your STR income and expenses.
Helpful tools:
- QuickBooks
- Stessa
- Host-focused financial apps
Clean books mean fewer errors and more deductions.
7. Plan Your Quarterly Tax Payments
If your STR generates strong cash flow, the IRS expects quarterly estimated tax payments. Good planning prevents penalties and avoids cash-flow surprises.
Conclusion
A well-planned first year can set your STR business up for major tax savings and long-term success. The investors who win are the ones who treat their short-term rentals like real businesses — not hobbies.
Launching or scaling a short-term rental? Get a custom first-year tax strategy and ensure you're taking advantage of every deduction legally available.