VRBO Host Taxes in Michigan - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Michigan

With the Great Lakes State attracting visitors year-round, Michigan’s vacation rental market is thriving. However, alongside the benefits of hosting on platforms like VRBO comes the responsibility of accurately reporting rental income. Income earned through VRBO and similar platforms is generally taxable at both the federal and Michigan state levels. This guide provides an overview of the key tax considerations for VRBO hosts in Michigan for the 2025 tax year.

Michigan State Tax Rules for Rental Income

As a resident of Michigan, filing a state income tax return is required regardless of income level. Michigan operates under a flat income tax rate, currently at 4.05% for the 2025 tax year. Rental income reported on your federal tax return must also be reported to the State of Michigan. Self-employed individuals, including VRBO hosts reporting income on Schedule C, will use Form MI-1040 and Schedule 1 to report their earnings. Even if reporting on Schedule E, the rental income will still need to be included on your MI-1040. Michigan does not offer a specific deduction for rental income like some other states. However, all eligible federal deductions will flow through to your Michigan return, reducing your overall taxable income. It’s crucial to maintain meticulous records of all income and expenses related to your VRBO activity. Michigan also requires estimated tax payments if you expect to owe $500 or more in taxes for the year. These payments are typically made quarterly. Failure to make timely estimated payments can result in penalties. For detailed information and the latest updates on Michigan tax laws, please visit the Michigan Department of Treasury website: Michigan Department of Treasury.

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

This is arguably the most important tax question for a VRBO host, as it directly impacts whether you’ll owe self-employment tax. The IRS classifies rental activities differently, and the distinction has significant tax implications.

• Schedule E (Passive Rental Income): Most casual VRBO hosts report their income and expenses on Schedule E (Supplemental Income and Loss). If you primarily provide basic lodging – a place to stay – and minimal services like cleaning between guests, you’ll likely fall into this category. Reporting on Schedule E means you are not subject to the 15.3% self-employment tax (Social Security and Medicare).
• Schedule C (Active Business Income): If you provide “substantial services” to your guests, the IRS may consider your rental activity an active business. “Substantial services” can include daily cleaning, providing meals, offering concierge services, or generally operating more like a bed and breakfast. If you report on Schedule C, you will be subject to the 15.3% self-employment tax on your net profit.

Top Tax Write-offs for Michigan Hosts

Maximizing your deductions is key to minimizing your tax liability. Here are some common tax write-offs available to Michigan VRBO hosts:

• Platform Fees: Fees charged by VRBO, Airbnb, and 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. For example, if 20% of your home is rented, you can deduct 20% of these expenses.
• Repairs, Maintenance & Cleaning: Costs associated with repairing and maintaining the rental property, as well as professional cleaning services and cleaning supplies, are deductible. Remember, repairs are different than improvements; repairs maintain the property, while improvements add value.
• Depreciation: This is a powerful deduction that allows you to recover the cost of your rental property (or portions of it) over its useful life. Depreciation can be complex, and it’s often advisable to consult with a tax professional to ensure you’re claiming it correctly.