VRBO Host Taxes in Houston, Texas - 2026

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Houston, Texas

Houston’s diverse attractions, from Space Center Houston to its vibrant culinary scene, make it a popular destination for travelers, creating a robust market for VRBO hosts. However, alongside the potential for income, comes the responsibility of understanding and fulfilling tax obligations. Rental income is subject to taxation at both the federal and state levels, and navigating these rules can be complex. This guide provides an overview of the key considerations for VRBO hosts in Houston, 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) that rarely applies to solo gig workers, it's a key part of the state's business tax structure. Generally, rental income is not subject to direct state income tax in Texas. However, the income is included when calculating your federal adjusted gross income (AGI), which can indirectly impact other state-level considerations. Furthermore, if your rental activity is structured as a formal business entity (like an LLC), that entity may be subject to the Franchise Tax if it exceeds the revenue threshold. Local occupancy taxes, often referred to as Hotel Occupancy Tax (HOT), are collected by cities and counties, including Houston. These taxes are typically remitted directly to the city or county and are not deductible on your federal income tax return. Houston, with its high demand for short-term rentals, particularly during events like the Houston Livestock Show and Rodeo, requires diligent tracking of these local taxes. Parking availability and associated costs can also be a factor, potentially impacting your rental income and deductible expenses. It’s crucial to stay informed about any changes to Houston’s short-term rental regulations, as these can influence tax obligations. 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 host, as it determines if you owe self-employment tax.

• 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 treated as running a bed and breakfast-style business.

Top Tax Write-offs for Houston, Texas Hosts

• Platform Fees: Fees from Airbnb, VRBO, etc., are fully deductible.
• Mortgage Interest & Property Taxes: Deduct the portion corresponding to the rental space and period. If the property is used for both personal and rental purposes, you must allocate these expenses accordingly.
• Repairs, Maintenance & Cleaning: Deduct costs for fixing items (leaky faucets, broken appliances), professional cleaning, and supplies. In Houston’s humid climate, mold remediation might be a relevant expense.
• Depreciation: A powerful but complex deduction for wear and tear on your property. Often requires a tax professional to calculate correctly. This applies to the building itself and certain furnishings.