VRBO Host Taxes in Connecticut - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Connecticut

Connecticut’s charming coastline and vibrant towns make it a popular destination for vacation rentals, creating opportunities for hosts. However, generating income through platforms like VRBO comes with tax obligations at both the federal and Connecticut state levels. Understanding these obligations is crucial for compliance and maximizing potential deductions.

Connecticut State Tax Rules for Rental Income

As a resident of Connecticut earning income from a VRBO property, a Connecticut state income tax return is required for the 2025 tax year. Connecticut operates on a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year (filing in 2026), the rates are expected to remain similar to prior years, ranging from 3.0% to 6.99%. Rental income is generally considered taxable income, and must be reported on your Connecticut income tax return. Self-employed individuals, including VRBO hosts reporting income on Schedule C at the federal level, will use Form CT-1040 and Schedule CT-SI (Self-Employment Income) to calculate and report their state income tax liability. It's important to note that Connecticut does not have a separate tax for rental income specifically; it's taxed as part of your overall adjusted gross income. Furthermore, Connecticut allows for a deduction for federal income taxes paid, which can help reduce your state tax burden. Keep meticulous records of all rental income and expenses to accurately calculate your state tax liability. The Department of Revenue Services provides detailed information and forms on their website: Connecticut Department of Revenue Services. Remember to consider any local property taxes paid, as these may impact your overall tax situation. Finally, if your rental activity results in a loss, Connecticut rules regarding net operating loss (NOL) carryforwards should be reviewed.

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 obligations.

• Schedule E (Passive Rental Income): Most casual hosts report on Schedule E (Supplemental Income and Loss) and are exempt from Self-Employment Tax. This applies if you only provide basic lodging and cleaning between guests. Essentially, if your involvement is limited to providing the space and ensuring it's habitable, Schedule E is likely appropriate.
• Schedule C (Active Business Income): However, if you provide "substantial services" (daily cleaning, meals, providing toiletries beyond basic soap, concierge services), you report on Schedule C (Profit or Loss from Business) and must pay the 15.3% self-employment tax (Social Security and Medicare). The IRS looks at the degree of services provided.

Top Tax Write-offs for Connecticut Hosts

• Platform Fees: Fees from Airbnb, VRBO, and other platforms are fully deductible as business expenses.
• Mortgage Interest & Property Taxes: Deduct the portion of your mortgage interest and property taxes that corresponds to the rental space and the period it was rented. If the property is used for both personal and rental purposes, you must allocate these expenses accordingly.
• Repairs, Maintenance & Cleaning: Deduct costs for fixing items (repairs), professional cleaning services, and cleaning supplies. Distinguish between repairs (maintaining the property) and improvements (adding value). Improvements are depreciated, not deducted immediately.
• Depreciation: A powerful but complex deduction for the wear and tear on your rental property. This allows you to deduct a portion of the property's cost over its useful life. Often requires a tax professional to calculate correctly.