VRBO Host Taxes in Rhode Island - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Rhode Island

From Newport mansions to Block Island beaches, Rhode Island’s short-term rental market offers unique opportunities for property owners. However, income earned through platforms like VRBO is generally taxable at both the federal and Rhode Island state levels. Understanding these tax obligations is crucial for compliance and maximizing potential deductions.

Rhode Island State Tax Rules for Rental Income

As a resident of Rhode Island, a state income tax return is required regardless of the amount of rental income earned. Rhode Island utilizes a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, the rates are expected to remain similar to prior years, ranging from 3.75% to 9.99%. Rental income is reported as part of your overall adjusted gross income. The primary form used to report self-employment income, including rental income reported on Schedule C, is Form RI-1040NR (Nonresident Income Tax Return) and Schedule RI-1040-SE (Self-Employment Income). Even if reporting on Schedule E, the net rental income will flow to your RI-1040. It’s important to note that Rhode Island does not have a separate tax form specifically for rental income; it’s integrated into the standard income tax return. Rhode Island also requires estimated tax payments if you expect to owe more than $1,000 in state income tax. Failure to make these payments can result in penalties. Keep meticulous records of all income and expenses related to your VRBO activity to accurately calculate your tax liability. The Rhode Island Division of Taxation provides comprehensive information and resources for taxpayers. You can find more details at Rhode Island Division of Taxation.

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 determines whether you’ll owe self-employment tax. The IRS classification significantly impacts your tax obligations.

• Schedule E (Passive Rental Income): Most casual VRBO hosts report their rental income and expenses on Schedule E (Supplemental Income and Loss). This applies if you primarily provide basic lodging and minimal services – essentially, making the property available and 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 services, the IRS may consider your rental 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 Rhode Island Hosts

• Platform Fees: Fees charged by VRBO, Airbnb, 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. For example, if your property was rented 50% of the year, you can deduct 50% of these expenses.
• Repairs, Maintenance & Cleaning: Costs associated with repairing and maintaining the rental property, including professional cleaning services and cleaning supplies, are deductible. Routine maintenance is deductible; major improvements that increase the property's value are generally depreciated.
• 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 calculations can be complex, and it’s often advisable to consult with a tax professional to ensure accurate reporting.