VRBO Host Taxes in Alabama - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Alabama

Alabama’s Gulf Coast and charming inland towns are attracting more visitors than ever, making VRBO hosting a popular income source. However, alongside the benefits of sharing your property comes the responsibility of understanding and fulfilling your tax obligations. Rental income is subject to both federal and Alabama state taxes, and proper reporting is crucial to avoid penalties.

Alabama State Tax Rules for Rental Income

As a resident of Alabama, you are required to file a state income tax return if your income exceeds the filing threshold. 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%, based on your taxable income. Rental income reported through Schedule E or Schedule C is subject to these rates. The primary form for self-employed individuals and those reporting business income (Schedule C) is Form A-4, the Alabama Individual Income Tax Return. Even if you report on Schedule E, you still need to file Form A-4 to report your total income and calculate your Alabama income tax liability. Alabama also allows for certain deductions that can reduce your taxable income, such as those related to business expenses. It’s important to maintain accurate records of all rental income and expenses throughout the year. Alabama does not have a separate tax specifically for rental income; it's incorporated into the overall individual income tax structure. Furthermore, Alabama conforms to many federal tax provisions, but it's essential to stay updated on any differences. For the most current information and official forms, please visit the Alabama Department of Revenue website: https://revenue.alabama.gov/. Remember to consult with a qualified tax professional to ensure you are taking advantage of all applicable deductions and complying with all state tax laws.

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

This is the most important tax question for a VRBO host, as it determines if you owe self-employment tax. The IRS classifies rental activities differently, impacting your tax liability.

• Schedule E (Passive Rental Income): Most casual hosts report on Schedule E (Supplemental Income and Loss). This applies if you primarily provide lodging and basic cleaning between guests. Reporting on Schedule E generally means you are not subject to the 15.3% self-employment tax (Social Security and Medicare).
• Schedule C (Active Business Income): However, if you provide "substantial services" to 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 report on Schedule C (Profit or Loss from Business) and must pay 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 write-offs for VRBO hosts in Alabama:

• 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 time and space used for rental purposes. If you rent out a portion of your home, you'll need to calculate the percentage of your home used for rental.
• Repairs, Maintenance & Cleaning: Deduct costs associated with repairing damage, routine maintenance (like HVAC servicing), and professional cleaning services. Supplies used for cleaning are also deductible.
• Depreciation: This is a powerful deduction that allows you to recover the cost of your rental property (or improvements) over its useful life. It's a complex calculation, and consulting a tax professional is highly recommended.