VRBO Host Taxes in District of Columbia - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in District of Columbia

The vibrant tourism scene in the District, fueled by monuments, museums, and events, creates a strong market for short-term rentals. Revenue generated from your VRBO property is considered taxable income by both the federal government and the District of Columbia. Understanding these tax obligations is crucial for compliance and maximizing potential deductions.

District of Columbia State Tax Rules for Rental Income

As a resident of the District of Columbia, you are required to file a District income tax return, even if you’ve already paid federal taxes. The District utilizes a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, income from your VRBO property is generally considered business income, and must be reported on your individual income tax return. The primary form for self-employed individuals and those with business income is Form D-140, Individual Income Tax Return for the District of Columbia, along with Schedule B (Business Income). Tax rates for the 2025 tax year (based on current projections) range from 4.0% to 8.5% depending on your income bracket. It’s important to note that the District of Columbia also has a standard deduction and personal exemptions that can reduce your taxable income. Furthermore, the District offers various credits and deductions that may be applicable to rental property owners, such as those related to energy efficiency improvements. Keep meticulous records of all income and expenses related to your VRBO activity to accurately calculate your tax liability. The Office of Tax and Revenue (OTR) provides detailed information and resources for taxpayers, including guides and FAQs. You can find more information at District of Columbia Office of Tax and Revenue.

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 classification significantly impacts your tax obligations.

• Schedule E (Passive Rental Income): Most casual hosts report on Schedule E (Passive Income) 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, 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 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 District of Columbia 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. Routine maintenance is deductible; major improvements that increase the property's value are generally depreciated.
• Depreciation: A powerful but complex deduction for the wear and tear on your rental property. It allows you to deduct a portion of the property's cost over its useful life. Often requires a tax professional to calculate correctly.