Airbnb Host Taxes in Minnesota - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for Airbnb Hosts in Minnesota

With the Land of 10,000 Lakes welcoming visitors year-round, short-term rentals have become a popular income source for Minnesota property owners. However, income earned through platforms like Airbnb is generally taxable at both the federal and Minnesota state levels. Understanding these tax obligations is crucial for compliance and maximizing potential deductions.

Minnesota State Tax Rules for Rental Income

As a resident of Minnesota, a state income tax return is required regardless of the amount of Airbnb income earned. Minnesota operates on a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, Minnesota residents reporting self-employment income, including Airbnb hosting income reported on Schedule C, will utilize Form M1, Minnesota Individual Income Tax Return, along with Schedule 1, Additional Income and Adjustments. Even if reporting on Schedule E, the rental income will need to be included on Form M1. Minnesota also has a specific form, Schedule IN, for income not subject to Minnesota tax, which may be relevant in certain situations. It's important to note that Minnesota does not have a separate tax specifically for short-term rental income, but it is treated as regular income subject to the state's income tax rates. The state also allows for deductions similar to the federal level, such as mortgage interest and property taxes, but these may be subject to limitations. Keep meticulous records of all income and expenses related to your Airbnb activity. The Minnesota Department of Revenue provides comprehensive information and resources for taxpayers, including guides and FAQs. You can find more information at the Minnesota Department of Revenue website.

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

This is the most important tax question for an Airbnb host, as it determines if you owe self-employment tax. The IRS classifies short-term rental activity based on the level of services provided.

• 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 considered an active business.

Top Tax Write-offs for Minnesota 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'll need to allocate these expenses accordingly.
• Repairs, Maintenance & Cleaning: Deduct costs for fixing items, professional cleaning, and supplies. Distinguish between repairs (maintaining the property) and improvements (adding value).
• Depreciation: A powerful but complex deduction for wear and tear on your property. Often requires a tax professional to calculate correctly.