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Vermont’s stunning landscapes and four distinct seasons make it a popular destination for travelers, creating a thriving short-term rental market. However, income earned through platforms like VRBO is generally taxable at both the federal and Vermont state levels. Understanding these tax obligations is crucial for compliant and financially sound hosting.
Vermont State Tax Rules for Rental Income
As a resident of Vermont, a state income tax return is required even if your federal tax liability is zero. Vermont operates on a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, Vermont residents reporting rental income as self-employment income will primarily utilize Form INC-540, Individual Income Tax Return, along with Schedule SE-V, Vermont Adjustment to Federal Self-Employment Tax. Rental income is considered part of your adjusted gross income (AGI) and is subject to Vermont’s income tax rates. It’s important to note that Vermont also has a property tax, which is separate from income tax, and is based on the assessed value of your rental property. Furthermore, Vermont requires the reporting of any income received from short-term rentals, even if it's below the federal filing threshold. Keep meticulous records of all rental income and expenses. Vermont also has specific rules regarding the taxation of transient lodging, and while generally applicable to hotels, it's prudent to stay informed about any potential changes that could affect short-term rentals. You can find comprehensive information and forms on the Vermont Department of Taxes website: Vermont Department of Taxes. Remember to factor in any potential local taxes or fees imposed by your town or city in addition to state income tax.
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.
Schedule E (Passive Rental Income): Most casual hosts report on Schedule E (Supplemental Income and Loss). This applies if you only provide basic lodging and cleaning between guests. If you fall into this category, you are generally exempt from the 15.3% self-employment tax (Social Security and Medicare).
Schedule C (Active Business Income): However, if you provide "substantial services" – think daily cleaning, providing meals, or offering concierge-style services – you report on Schedule C (Profit or Loss from Business). This triggers the 15.3% self-employment tax on your net rental income. The line between Schedule E and Schedule C can be blurry, so careful consideration is vital.
Top Tax Write-offs for Vermont 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 rental space and the period it was rented. 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 (repairs), maintaining the property (lawn care, snow removal – especially important in Vermont!), and professional cleaning services.
Depreciation: A powerful but complex deduction that allows you to recover the cost of your rental property over its useful life. This often requires the assistance of a qualified tax professional to ensure accurate calculation and reporting.
⚡️ Tax Estimator
Estimate your taxes using current IRS rules.
Simplified Method: $5 per sq ft (Max 300 sq ft)
Your Estimated Results:
Net Profit (Taxable Income):$0.00
Federal Self-Employment Tax (15.3%)
Includes 12.4% for Social Security and 2.9% for Medicare.$0.00