VRBO Host Taxes in Indiana - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Indiana

With Indiana’s diverse landscapes, from the dunes of Lake Michigan to the rolling hills of Brown County, short-term rentals are becoming increasingly popular. Revenue generated from your VRBO property is considered taxable income by both the federal government and the State of Indiana. Understanding these tax obligations is crucial for compliance and maximizing potential deductions.

Indiana State Tax Rules for Rental Income

As a resident of Indiana earning income from a VRBO property, filing a state income tax return is required for the 2025 tax year. Indiana operates under a flat income tax rate, currently at 3.15% for the 2025 tax year. This means all taxable income, regardless of amount, is taxed at the same rate. Rental income is reported as part of your overall adjusted gross income (AGI). Self-employed individuals, including VRBO hosts operating as a business (see section 2), will need to calculate and pay estimated taxes quarterly to avoid penalties. The primary form used for reporting self-employment income and calculating Indiana income tax is Form IT-1040, Indiana Resident Income Tax Return. You will also likely need Schedule IN-K-1 if you operate as a pass-through entity. It’s important to note that Indiana does not have a separate tax specifically for rental income; it’s integrated into the overall state income tax system. Keep meticulous records of all income and expenses related to your VRBO property, as these will be essential when filing your state return. Indiana also offers various credits and deductions that may apply, so exploring the Department of Revenue website is recommended. Remember to retain documentation for at least three years in case of an audit.

For more information and resources, please visit the Indiana Department of Revenue: https://www.in.gov/dor/

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.

• 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. Think of it as simply renting out a space.
• 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. This is because the IRS considers it an active business, not just a rental.

Top Tax Write-offs for Indiana Hosts

• Platform Fees: Fees from Airbnb, VRBO, etc., are fully deductible.
• Mortgage Interest & Property Taxes: Deduct the portion corresponding to the rental space and period. 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, professional cleaning, and supplies. Routine maintenance is deductible; improvements that add value to the property are depreciated.
• Depreciation: A powerful but complex deduction for wear and tear on your property. Often requires a tax professional to calculate correctly. This applies to the building itself and certain furnishings.