VRBO Host Taxes in Washington - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for VRBO Hosts in Washington

The Evergreen State’s stunning scenery and vibrant cities, from Seattle to Spokane, make Washington a popular destination for travelers, creating lucrative opportunities for VRBO hosts. However, alongside the income comes the responsibility of understanding and fulfilling tax obligations at both the federal and state levels. This guide provides an overview of the tax considerations for VRBO hosts in Washington for the 2025 tax year.

Washington State Tax Rules for Rental Income

Washington is unique in that it does not have a traditional personal income tax. However, rental income is still subject to the Business & Occupation (B&O) tax, a gross receipts tax levied on the gross income of businesses. For most VRBO hosts operating as individuals, the B&O tax threshold is relatively high – currently $28,000 in gross income. This means that many hosts will not owe B&O tax. However, it’s crucial to be aware of this tax and monitor your income. Even if you don’t exceed the threshold, accurate record-keeping is essential. The Washington Department of Revenue offers detailed information and resources for businesses, including those engaged in short-term rentals. Local jurisdictions (cities and counties) may also impose lodging taxes, which are separate from the state B&O tax. These local taxes are typically collected and remitted through the VRBO platform, but it’s the host’s responsibility to ensure compliance with any applicable local regulations. Failure to comply with B&O tax or local lodging tax requirements can result in penalties and interest. Consulting with a tax professional familiar with Washington state tax laws is highly recommended to ensure accurate reporting and compliance.

For more information, visit the Washington State 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 a host will make, as it directly impacts whether self-employment tax is due. This classification hinges on the level of services provided to guests.

• Schedule E (Passive Rental Income): The majority of casual VRBO hosts will report their rental income and expenses on Schedule E (Supplemental Income and Loss). This applies when you primarily provide basic lodging and minimal services, such as cleaning between guests. Reporting on Schedule E means you are not subject to the 15.3% self-employment tax.
• Schedule C (Active Business Income): If you provide “substantial services” to guests – such as daily cleaning, providing meals, or offering concierge-style services – the IRS may consider your VRBO activity an active business. In this case, you must report income and expenses on Schedule C (Profit or Loss from Business) and pay the 15.3% self-employment tax on your net profit.

Top Tax Write-offs for Washington Hosts

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

• Platform Fees: Fees charged by VRBO, Airbnb, 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 percentage of your home used for rental purposes and the number of days it was rented.
• Repairs, Maintenance & Cleaning: Expenses related to maintaining and repairing your rental property, including professional cleaning services and cleaning supplies, are deductible.
• Depreciation: This is a complex deduction that allows you to recover the cost of your rental property (or improvements) over its useful life. It’s a powerful deduction, but often requires the assistance of a qualified tax professional to calculate correctly.