VRBO Host Taxes in Tennessee - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Tennessee

From the Smoky Mountains to Beale Street, Tennessee’s vibrant tourism industry offers lucrative opportunities for VRBO hosts. However, alongside the income comes a responsibility to understand and comply with applicable tax laws. Rental income generated through platforms like VRBO 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 or salaries. This also extends to rental income. However, this does not mean you are exempt from all tax obligations. Federal income tax still applies to your VRBO earnings, and you are responsible for reporting this income to the IRS. Furthermore, while Tennessee doesn’t have a broad-based income tax, it does levy a state sales tax on short-term rentals. This sales tax is collected and remitted by the VRBO platform in many cases, but it’s crucial to verify this is happening correctly. Local governments (cities and counties) in Tennessee also have the authority to impose local taxes on short-term rentals, including hotel occupancy taxes. These local taxes are often collected and remitted by the platform, but hosts should confirm compliance with the specific regulations of their county and municipality. For example, Nashville/Davidson County has specific rules regarding short-term rental permits and tax collection. The state encourages hosts to understand their obligations, particularly regarding the proper classification of their rental activity for sales tax purposes. Tennessee's tourism-driven economy means these taxes are vital for funding local services and infrastructure. Staying informed about changes in these regulations is essential for all VRBO hosts. You can find more information and resources on the Tennessee Department of Revenue website: Tennessee Department of Revenue.

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

Determining whether your VRBO activity constitutes a passive rental or an active business is the most important tax decision you’ll make. This distinction significantly impacts your tax liability, specifically whether you’ll owe self-employment tax.

• Schedule E (Passive Rental Income): The majority of casual VRBO hosts report their income and expenses on Schedule E (Supplemental Income and Loss). If you primarily provide lodging and basic cleaning between guests – think changing linens and wiping down surfaces – you likely qualify for Schedule E reporting. This means you are not subject to the 15.3% self-employment tax (Social Security and Medicare).
• 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 responsible for paying the 15.3% self-employment tax.

Top Tax Write-offs for Tennessee Hosts

Maximizing your deductions is key to minimizing your tax burden. Here are some common tax write-offs available to Tennessee VRBO hosts:

• Platform Fees: All fees charged by VRBO, Airbnb, or other rental 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 maintaining and repairing your rental property are deductible. This includes expenses for plumbing repairs, appliance fixes, landscaping, professional cleaning services, and cleaning supplies.
• Depreciation: Depreciation allows you to deduct a portion of the cost of your rental property over its useful life. This is a complex deduction, and it’s highly recommended to consult with a qualified tax professional to ensure you’re taking the correct amount.