VRBO Host Taxes in New Jersey - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in New Jersey

With the Jersey Shore drawing visitors year-round and charming towns inland offering weekend getaways, New Jersey’s short-term rental market is thriving. However, income earned through platforms like VRBO is generally taxable at both the federal and New Jersey state levels. Understanding these tax obligations is crucial for compliance and maximizing potential deductions.

New Jersey State Tax Rules for Rental Income

As a New Jersey resident earning income from a VRBO property, filing a New Jersey state income tax return is required, regardless of the amount earned. New Jersey operates on a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, income reported from VRBO will be included in your overall adjusted gross income (AGI) and taxed accordingly. The primary form for self-employed individuals and those reporting business income (if applicable – see section 2) is Form NJ-1040, along with Schedule E for rental income or Schedule C for business income. New Jersey also requires taxpayers to file a Resident Income Tax Return (Form NJ-1040) even if no tax is due. It’s important to note that New Jersey does not have a separate tax form specifically for short-term rental income; it’s integrated into the standard income tax structure. Furthermore, New Jersey allows for a deduction for property taxes paid, which can be particularly beneficial for VRBO hosts. Keep detailed records of all rental income and expenses, as New Jersey’s Division of Taxation actively audits returns. Failure to accurately report rental income can result in penalties and interest. For the most up-to-date information and forms, consult the New Jersey Division of Taxation website: https://www.nj.gov/treasury/taxation/

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. The IRS classifies rental activities differently, impacting your tax liability.

• 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 New Jersey Hosts

• Platform Fees: Fees from Airbnb, VRBO, etc., are fully deductible. These are considered expenses directly related to generating rental income.
• Mortgage Interest & Property Taxes: Deduct the portion of mortgage interest and property taxes corresponding to the rental space and the period it was rented. For example, if your property was rented 50% of the year, you can deduct 50% of these expenses.
• Repairs, Maintenance & Cleaning: Deduct costs for fixing items (leaky faucets, broken appliances), professional cleaning services, and cleaning supplies. Routine maintenance is deductible; major improvements are depreciated.
• Depreciation: A powerful but complex deduction for wear and tear on your property. This allows you to deduct a portion of the property's cost over its useful life. Often requires a tax professional to calculate correctly.