VRBO Host Taxes in Delaware - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Delaware

Delaware’s coastal charm and vibrant cities make it a popular destination for short-term rentals, offering hosts a unique opportunity to generate income. However, revenue earned through platforms like VRBO is generally taxable at both the federal and Delaware state levels. Understanding these tax obligations is crucial for compliance and maximizing potential deductions.

Delaware State Tax Rules for Rental Income

As a resident of Delaware, a state income tax return is required regardless of the amount of rental income earned. Delaware utilizes a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, the rates are expected to remain consistent with prior years, ranging from 0% to 6.6%. Rental income is reported as part of your overall adjusted gross income. Delaware requires self-employed individuals, including VRBO hosts operating as a business (see section 2), to file an annual income tax return. The primary form for reporting self-employment income is Form 1040-ES with Delaware Schedule 3 (Income from Business or Profession). It's important to note that Delaware does not have a separate tax form specifically for rental income; it's integrated into the standard individual income tax return. Estimated tax payments are generally required if you expect to owe $1,000 or more in Delaware income tax. Delaware also offers various credits and deductions that may reduce your tax liability. Staying current with Delaware tax law is essential, and resources are available through the Delaware Division of Revenue: Delaware Division of Revenue. Failure to file and pay taxes on time can result in penalties and interest.

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 whether 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). This applies if you primarily provide basic lodging and cleaning between guests. If your involvement is limited to collecting rent and maintaining the property, you're likely considered a passive rental activity 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 guests – such as daily cleaning, providing meals, or offering concierge-style services – you report on Schedule C (Profit or Loss from Business). This classifies your rental activity as an active business, and you must pay the 15.3% self-employment tax on your net rental income.

Top Tax Write-offs for Delaware 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 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 associated with fixing items on the property, routine maintenance (like landscaping), and professional cleaning services. Supplies used for cleaning are also deductible.
• Depreciation: A powerful but complex deduction that allows you to recover the cost of your rental property (and certain furnishings) over its useful life. Depreciation calculations can be intricate, and consulting a tax professional is often recommended.