Airbnb Host Taxes in Alabama - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for Airbnb Hosts in Alabama

From the beaches of Gulf Shores to the historic streets of Mobile, Alabama’s growing tourism industry presents exciting opportunities for short-term rental hosts. However, alongside the potential income comes the responsibility of understanding and fulfilling tax obligations. Income earned through Airbnb and other short-term rental platforms is generally taxable at both the federal and Alabama state levels.

Alabama State Tax Rules for Rental Income

As a resident of Alabama, a state income tax return is required regardless of the amount of rental income earned. Alabama utilizes a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, Alabama’s tax rates range from 1.7% to 5.0%. Rental income is reported as part of your overall adjusted gross income. The primary form used to report self-employment income, including rental income reported on Schedule C, is Form A-4. Even if reporting on Schedule E, the net rental income (or loss) will flow to your Form A-4. Alabama also allows for certain deductions similar to the federal level, such as mortgage interest and property taxes, which can help reduce your overall tax liability. It’s crucial to maintain accurate records of all rental income and expenses. Alabama does not have a separate tax form specifically for rental income; it's integrated into the standard individual income tax return. Furthermore, Alabama follows federal guidelines regarding depreciation, allowing hosts to deduct a portion of the property's cost over its useful life. Keep in mind that changes to tax laws can occur, so staying informed is vital. For the most up-to-date information and forms, consult the Alabama Department of Revenue website: https://revenue.alabama.gov/. Failure to properly report rental income can result in penalties and interest.

The Critical Tax Question: Are You a Business or a Rental?

This is arguably the most important tax question for an Airbnb host, as it directly impacts whether you owe self-employment tax. The IRS classifies rental activities differently, and the distinction has significant financial consequences.

• Schedule E (Passive Rental Income): Most casual hosts report their rental income and expenses on Schedule E (Supplemental Income and Loss). If you primarily provide lodging and basic cleaning between guests – essentially, a place to stay – you’ll likely fall into this category and are exempt from the 15.3% self-employment tax (Social Security and Medicare).
• Schedule C (Active Business Income): However, if you provide “substantial services” to your guests, such as daily cleaning, providing meals, or offering concierge-style services, the IRS may consider your rental activity an active business. In this case, you’ll report on Schedule C (Profit or Loss from Business) and will be subject to the 15.3% self-employment tax.

Top Tax Write-offs for Alabama Hosts

Maximizing your deductions is key to minimizing your tax burden. Here are some common tax write-offs available to Alabama Airbnb hosts:

• Platform Fees: Fees charged by Airbnb, VRBO, and other platforms are fully deductible as business expenses.
• Mortgage Interest & Property Taxes: You can deduct the portion of your mortgage interest and property taxes that corresponds to the percentage of your home used for rental purposes and the number of days it was rented.
• Repairs, Maintenance & Cleaning: Expenses related to repairing and maintaining your rental property, including professional cleaning services and cleaning supplies, are deductible.
• Depreciation: This is a powerful deduction that allows you to recover the cost of your rental property over its useful life. It’s a complex calculation, and consulting a tax professional is often recommended.