VRBO Host Taxes in Texas - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Texas

The Texas hospitality scene is booming, with short-term rentals playing a significant role in welcoming visitors to cities like Austin, San Antonio, and Galveston. However, alongside the opportunity to earn income as a VRBO host comes the responsibility of understanding and fulfilling tax obligations. Rental income is generally taxable at both the federal and state levels, even in a state known for its business-friendly environment.

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. Generally, rental income itself isn't subject to direct state taxation in Texas, as there's no state income tax. However, if your VRBO activity is structured as a formal business entity (like an LLC or corporation), that entity may be subject to the Franchise Tax based on its total revenue. It’s crucial to understand that sales tax can apply to short-term rentals in Texas. Cities and counties have the authority to collect Hotel Occupancy Taxes (HOT), often referred to as sales tax on rentals. The rate varies significantly depending on location – some cities have rates exceeding 15%. Hosts are generally responsible for collecting and remitting these taxes to the appropriate local taxing authority. Failure to do so can result in penalties and interest. Keep meticulous records of all rental income and taxes collected and remitted. Resources are available to help navigate these local requirements, and it's advisable to check with the city and county where your property is located for specific rules. 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 activities differently, impacting your tax liability.

• 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 space for someone to stay.
• 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 because the IRS considers it an active business, not just a passive rental.

Top Tax Write-offs for 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. If you rent out a portion of your home, you'll need to calculate the percentage of the home used for rental purposes.
• Repairs, Maintenance & Cleaning: Deduct costs for fixing items (repairs), professional cleaning services, and cleaning supplies. Remember, repairs maintain the property; improvements add value.
• Depreciation: A powerful but complex deduction for the wear and tear on your rental property and furnishings. It allows you to deduct a portion of the property's cost over its useful life. Often requires a tax professional to calculate correctly.