VRBO Host Taxes in Hawaii - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Hawaii

Welcoming guests to the Aloha State through platforms like VRBO offers a unique opportunity, but it also introduces tax obligations. Rental income generated from your Hawaiian property is subject to both federal and Hawaii state taxes, requiring careful record-keeping and understanding of applicable regulations.

Hawaii State Tax Rules for Rental Income

As a resident of Hawaii, you are required to file a state income tax return if your rental income exceeds the filing threshold. Hawaii operates under a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, Hawaii’s income tax rates are expected to remain consistent with prior years, ranging from 1.4% to 11% depending on your taxable income bracket. The primary form used for reporting self-employment income, including rental income treated as business income, is Form N-11, Hawaii Individual Income Tax Return. Schedule E, used for reporting passive rental income, is also incorporated into Form N-11. It’s crucial to accurately determine whether your rental activity is considered passive (Schedule E) or active (Schedule C) as this significantly impacts your tax liability. Hawaii also requires the payment of General Excise Tax (GET) on rental income. The GET rate is currently 4% statewide, but counties may impose additional rates. You'll need to register with the Hawaii Department of Taxation to collect and remit GET. Keep detailed records of all rental income and expenses, including dates of rental, amounts received, and all related costs. Failure to comply with Hawaii’s tax laws can result in penalties and interest. For more information and access to forms, please visit the Hawaii Department of Taxation website: https://tax.hawaii.gov/

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

Determining whether your VRBO activity constitutes a passive rental or an active business is the most important tax decision a host will make, as it dictates whether self-employment tax applies.

• Schedule E (Passive Rental Income): The majority of casual VRBO hosts report income and expenses on Schedule E (Supplemental Income and Loss). If you primarily provide lodging and basic cleaning between guests – think changing linens and a quick tidy-up – you likely qualify for Schedule E reporting. This means you are not subject to the 15.3% self-employment tax (Social Security and Medicare).
• Schedule C (Active Business Income): If you offer “substantial services” alongside the rental, such as daily cleaning, providing meals, concierge services, or actively marketing your property as a bed and breakfast, the IRS may classify your activity as a business. In this case, you report on Schedule C (Profit or Loss from Business) and are subject to self-employment tax.

Top Tax Write-offs for Hawaii Hosts

• Platform Fees: All fees charged by VRBO, Airbnb, or other rental 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 percentage of your home used for rental purposes and the number of days it was rented. For example, if your property was rented 50% of the year, you can deduct 50% of these expenses.
• Repairs, Maintenance & Cleaning: Costs associated with maintaining and repairing your rental property, including professional cleaning services and cleaning supplies, are deductible. Distinguish between repairs (fixing something broken) and improvements (adding value to the property), as improvements are depreciated over time.
• Depreciation: This is a significant deduction that allows you to recover the cost of your rental property (and certain furnishings) over its useful life. Depreciation calculations can be complex, and consulting a tax professional is highly recommended to ensure accurate reporting.