Airbnb Host Taxes in Tennessee - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for Airbnb Hosts in Tennessee

From the Smoky Mountains to Beale Street, Tennessee’s vibrant tourism industry provides ample opportunity for short-term rental hosts. However, alongside the potential for income comes the responsibility of accurate tax reporting. Rental income generated through platforms like Airbnb is generally taxable at both the federal and state levels, even though Tennessee boasts a unique tax landscape.

Tennessee State Tax Rules for Rental Income

Tennessee stands out as one of the few states with no state income tax on wages and salaries. This also extends to rental income. However, this does not mean there are no tax obligations. Federal income tax still applies to all rental income earned. Furthermore, while Tennessee doesn’t have a broad-based income tax, it does levy a state sales tax on short-term rentals, along with local taxes. These taxes are typically collected and remitted by the Airbnb platform directly to the state and local governments, but it’s crucial to verify this is happening correctly. Hosts should be aware of any local occupancy taxes imposed by the city or county where the rental property is located – these can vary significantly. For example, Nashville/Davidson County has a substantial hotel occupancy tax. Understanding these local tax rules is paramount to avoid penalties. Tennessee also has a business tax, which may apply depending on the gross receipts of the rental activity. The Tennessee Department of Revenue provides detailed information on sales and use tax, as well as business tax requirements, on their website: Tennessee Department of Revenue. It's important to note that even with no state income tax, accurate record-keeping of all income and expenses is vital for federal tax compliance. The lack of state income tax doesn't diminish the importance of diligent tax preparation.

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

Determining whether your Airbnb activity constitutes a passive rental or an active business is the most important tax question for a host, as it directly impacts your tax liability, specifically whether you owe self-employment tax.

• Schedule E (Passive Rental Income): Most casual 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 between guests, such as cleaning. Reporting on Schedule E generally exempts you from the 15.3% self-employment tax.
• Schedule C (Active Business Income): If you provide “substantial services” to guests – think daily cleaning, providing meals, concierge services, or offering amenities comparable to a hotel – the IRS may classify your activity as an active business. In this case, you report on Schedule C (Profit or Loss from Business) and are subject to the 15.3% self-employment tax on your net profits.

Top Tax Write-offs for Tennessee Hosts

Maximizing deductions is key to minimizing your tax burden. Here are some common tax write-offs available to Tennessee Airbnb 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 for repairing damage, routine maintenance (like HVAC servicing), and professional cleaning services are deductible. This also includes the cost of cleaning supplies.
• Depreciation: This is a powerful deduction that allows you to recover the cost of your rental property (or portions thereof) over its useful life. Depreciation calculations can be complex, and consulting a tax professional is often recommended.