VRBO Host Taxes in Montana - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Montana

Montana’s Big Sky Country attracts visitors year-round, and offering a vacation rental through platforms like VRBO can be a rewarding venture. However, alongside the income comes the responsibility of understanding and fulfilling tax obligations. Rental income is subject to taxation at both the federal and Montana state levels, requiring careful record-keeping and accurate reporting.

Montana State Tax Rules for Rental Income

As a resident of Montana, filing a state income tax return is required regardless of the amount of rental income earned. Montana operates under a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, Montana residents reporting rental income as self-employment income will utilize Form 17, Montana Individual Income Tax Return, and Schedule 1, Adjustments to Income. The current tax rates for 2025 (based on 2024 rates, as 2025 rates are not yet finalized) range from 1% to 6.75%, depending on your taxable income. It’s crucial to accurately calculate your net rental income after deducting allowable expenses. Montana also allows for certain credits and deductions that may reduce your overall tax liability. Furthermore, Montana considers rental income earned as business income subject to the state’s business equipment tax if the total cost of equipment exceeds $1,000. Keep detailed records of all rental-related income and expenses to support your tax return. The Montana Department of Revenue provides comprehensive information and resources for taxpayers; you can find more details at Montana Department of Revenue. Remember to consult the latest tax forms and instructions available on their website as tax laws are subject to change.

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 is crucial.

• Schedule E (Passive Rental Income): Most casual VRBO hosts report their rental income and expenses on Schedule E (Supplemental Income and Loss). If you primarily provide basic lodging – a place to stay and perhaps minimal cleaning between guests – you’ll likely fall into this category. Reporting on Schedule E means you do not pay the 15.3% self-employment tax (Social Security and Medicare) on your rental profits.
• Schedule C (Active Business Income): If you provide “substantial services” to your guests, the IRS may consider your rental activity a 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, your net rental income is subject to both income tax and the 15.3% self-employment tax.

Top Tax Write-offs for Montana Hosts

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

• Platform Fees: Fees charged by VRBO, Airbnb, or other booking 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 your rental space occupies 20% of your home, you can deduct 20% of these expenses.
• Repairs, Maintenance & Cleaning: Costs associated with maintaining and repairing your rental property are deductible. This includes plumbing repairs, appliance fixes, landscaping, and professional cleaning services. Cleaning supplies are also deductible.
• Depreciation: This is a powerful deduction that allows you to recover the cost of your rental property (and certain furnishings) over its useful life. Depreciation can significantly reduce your taxable income, but it’s a complex calculation. Consulting a tax professional is highly recommended.