Airbnb Host Taxes in New Jersey - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for Airbnb Hosts in New Jersey

From the Jersey Shore to the charming towns of the Highlands, New Jersey’s short-term rental market is thriving. However, alongside the income comes a responsibility to understand and fulfill tax obligations. Revenue generated from Airbnb and other short-term rental platforms is generally considered taxable income at both the federal and New Jersey state levels. Proper record-keeping and understanding of applicable deductions are crucial for maximizing after-tax profits.

New Jersey State Tax Rules for Rental Income

As a New Jersey resident, filing a state income tax return is required regardless of the amount of Airbnb income earned. New Jersey operates under a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, New Jersey residents earning income from short-term rentals will report this income on Form NJ-1040, and if reporting as a business, will likely utilize Form NJ-1040-C, designed for reporting income from a business or profession. The state does not have a specific form dedicated solely to rental income; it's integrated into the standard income tax return. It’s important to accurately calculate your net rental income (gross rental income less allowable expenses) and report it accordingly. New Jersey also allows for certain deductions similar to the federal level, such as mortgage interest and property taxes, but these may be subject to limitations. Furthermore, New Jersey’s Division of Taxation actively monitors short-term rental activity and may issue guidance or audits to ensure compliance. Failure to report rental income can result in penalties and interest. Keep detailed records of all income and expenses to support your tax filing. The state also has rules regarding sales tax on rentals, though these generally apply to longer-term rentals and are less common for typical Airbnb stays. Consult the New Jersey Division of Taxation website for the most up-to-date information and regulations: New Jersey Division of Taxation.

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

This is arguably the most important tax question for an Airbnb host, as it directly impacts whether you’ll owe self-employment tax. The IRS classification determines how your income is taxed and what deductions you can claim.

• Schedule E (Passive Rental Income): Most casual hosts report their Airbnb income on Schedule E (Supplemental Income and Loss). This applies if you primarily provide basic lodging and minimal services – essentially, offering a place to stay and perhaps light cleaning between guests. Reporting on Schedule E exempts you from the 15.3% self-employment tax.
• Schedule C (Active Business Income): If you provide “substantial services” to your guests, such as daily cleaning, providing meals, or offering concierge-style assistance, the IRS may consider your Airbnb activity an active business. In this case, you’ll report income and expenses on Schedule C (Profit or Loss from Business) and will be subject to the 15.3% self-employment tax (Social Security and Medicare).

Top Tax Write-offs for New Jersey Hosts

• Platform Fees: Fees charged by Airbnb, VRBO, and other 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.
• Repairs, Maintenance & Cleaning: Expenses related to maintaining and repairing your rental property, including professional cleaning services and cleaning supplies, are deductible.
• Depreciation: This is a powerful deduction that allows you to recover the cost of your rental property over its useful life. It accounts for the wear and tear on the property. Depreciation calculations can be complex, and consulting a tax professional is often recommended.