VRBO Host Taxes in Austin, Texas - 2026

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Austin, Texas

Austin’s vibrant music scene and thriving tech industry drive significant demand for short-term rentals, making VRBO hosting a popular income source. However, that income is subject to both federal and Texas state taxes, requiring careful record-keeping and understanding of applicable regulations. This guide provides an overview of the tax implications for VRBO hosts operating in Austin, Texas, for the 2025 tax year.

Texas State Tax Rules for Rental Income

The big perk in the Lone Star State is no personal income tax. However, be aware of the Texas Franchise Tax. While it has a high threshold (over $1.2 million in revenue) that rarely applies to solo gig workers, it's a key part of the state's business tax structure. Rental income itself isn’t directly taxed at the state level in Texas. However, as a business owner operating in Austin, you may be subject to other state-level considerations. For example, if your rental property generates sales taxable services (like providing catered breakfasts or offering concierge services), you'll need to collect and remit sales tax. Austin also has specific regulations regarding short-term rentals, including permitting requirements and occupancy limits, which can impact your tax obligations. Failure to comply with these local ordinances can result in penalties. Furthermore, property taxes levied by Travis County and the City of Austin are deductible at the federal level (see section below). It’s crucial to stay informed about any changes to Austin’s short-term rental regulations, as these can frequently evolve. Consider the impact of parking availability in popular Austin neighborhoods – any costs associated with providing guest parking (if applicable) may be deductible. For comprehensive information on Texas taxes, visit the Texas Comptroller of Public Accounts website.

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 activity based on the level of services provided to guests.

• 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 providing a place to stay.
• Schedule C (Active Business Income): However, if you provide "substantial services" (daily cleaning, meals, providing toiletries beyond basic soap, concierge services, etc.), you report on Schedule C and must pay the 15.3% self-employment tax. This is treated as running a bed and breakfast-style business.

Top Tax Write-offs for Austin, Texas Hosts

• Platform Fees: Fees from Airbnb, VRBO, and other platforms are fully deductible as business expenses.
• Mortgage Interest & Property Taxes: Deduct the portion of your mortgage interest and property taxes that corresponds to the rental space and the period it was rented. Austin property taxes can be significant, so this deduction can be substantial.
• Repairs, Maintenance & Cleaning: Deduct costs for fixing items in your rental property, professional cleaning services, and cleaning supplies. Maintaining a property in a competitive market like Austin often requires regular upkeep.
• Depreciation: A powerful but complex deduction for the wear and tear on your property and furnishings. This allows you to deduct a portion of the property's cost over its useful life. Often requires a tax professional to calculate correctly.