Airbnb Host Taxes in Denver, Colorado - 2026

Updated for 2026 (Filing 2025 Taxes)

The Expert Tax Guide for Airbnb Hosts in Denver, Colorado

Denver's short-term rental market remains one of the most vibrant in the country. From the influx of tourists heading to Red Rocks to business travelers attending summits at the Colorado Convention Center, the Mile High City offers incredible opportunity. However, hosting isn't just about guest reviews and occupancy rates: it's about navigating a complex web of federal and state tax obligations. Whether you're renting a carriage house in Five Points or a condo in LoDo, understanding these rules is the difference between a profitable year and a surprise bill from the IRS.

Colorado State Tax Nuances

Colorado makes things relatively straightforward with a flat income tax rate, which is set at 4.40% for the 2025 tax year. If you're a Colorado resident, you'll report your Airbnb earnings on Form DR 0104. It's important to remember that Colorado uses your Federal Adjusted Gross Income (AGI) as a starting point. This means that while the state tax is flat, the deductions you take at the federal level will significantly impact what you owe the Colorado Department of Revenue.

One specific Denver nuance to track is the city's Short-Term Rental (STR) license requirement. While the license fee itself is a deductible business expense, Denver's strict residency rules (requiring the rental to be your primary residence) mean you're often dealing with "mixed-use" property expenses. This makes precise record-keeping vital, as you'll need to prorate utilities and maintenance between your personal use and your guest's use. For the most current state forms, you can always visit the Colorado Department of Revenue.

The Critical Tax Question: Business or Rental?

How you file depends entirely on the level of "hospitality" you provide. This distinction determines whether you'll be hit with the 15.3% self-employment tax. Most Denver hosts fall into one of two categories:

• Schedule E (Passive Rental Income): This is the path for most casual hosts. If you provide basic lodging, utilities, and cleaning between stays, the IRS views this as passive income. You'll pay income tax, but you'll avoid the self-employment tax.
• Schedule C (Active Business Income): If you provide "substantial services" similar to a hotel - think daily linen changes, providing breakfast, or offering guided mountain tours - the IRS reclassifies you as a business. While you'll owe self-employment tax, this classification also opens the door to more aggressive business deductions.

The 20% QBI Deduction: A Game Changer

One of the most powerful tools in your kit is the Qualified Business Income (QBI) deduction. Under Section 199A, many hosts can deduct up to 20% of their net rental income from their taxable income. This isn't just a standard deduction: it's a significant "top-line" reduction that can save you thousands. To qualify, your hosting activity usually needs to rise to the level of a "trade or business," which often requires hitting a safe harbor of 250 hours of service per year (including time spent on repairs, guest communications, and cleaning).

Maximizing Your Write-Offs and Using the Advanced Calculator

To truly optimize your return, you need to look beyond basic supplies. Our Advanced Calculator is designed to help you navigate the most complex parts of the tax code. Here is how you should evaluate your top deductions:

• Standard Mileage vs. Actual Expenses: If you're driving to your rental property or heading to the store for guest supplies, you have a choice. You can use the IRS standard mileage rate or track "Actual Expenses" like gas, oil changes, and insurance. Our calculator compares these two methods to see which one puts more money back in your pocket.
• Depreciation: This is often a host's largest deduction. You can't deduct the cost of the home all at once, but you can deduct a portion of the structure's value every year. Our calculator helps you factor in depreciation alongside other "Actual Expenses" to see if they outweigh the simplicity of the standard mileage rate.
• The Home Office Deduction: If you have a dedicated space in your home used exclusively for managing your Denver rentals, you may be eligible for a Home Office deduction. This allows you to write off a portion of your own rent or mortgage, insurance, and utilities.
• Platform Fees and Operating Costs: Never forget that the 3% to 5% fee Airbnb takes off the top is fully deductible. So are your Denver STR business license fees, specialized short-term rental insurance, and professional photography for your listing.

Tax laws change, and Denver's local ordinances regarding lodger's taxes and licensing are constantly evolving. By using the right tools and staying informed on deductions like the QBI, you're not just hosting - you're running a tax-efficient business.