Renting part of your home or hosting short stays in the US

Renting a room or hosting short stays requires more than recording the platform payout. Establish which space and days were rental use, which services you supplied, and which local obligations apply. These questions affect different parts of the analysis.

This article uses US federal 2025 rules. It gives a method for organizing facts, not a completed return. Start with US rental deductions: expenses, improvements, and basis for expense records and US rental depreciation: the deduction, the basis adjustment, and the eventual sale for depreciation.

Distinguish dedicated space from a shared dwelling

For part of a home, identify the rental area and a reasonable allocation method for shared costs, then account for changes in use over time. Direct costs and costs shared with personal living space need different treatment. A room that you use personally between bookings is not automatically a year-round rental area.

For a dwelling used both personally and by renters, track actual fair-rental days and personal-use days. Days merely advertised but vacant are a different record. IRS Publication 527 addresses partial-property and shared-use allocations.

Keep floor plans, booking dates, the use calendar and invoices. An area percentage tells you about space; it does not alone answer a days-of-use test.

Apply the residence test before claiming a loss

A dwelling is treated as used as a home for this rule when personal use exceeds the greater of 14 days or 10% of the days rented at fair rental value. Personal use can include family or below-market occupancy, subject to the specified exceptions. IRS Topic 415 explains the test.

If a dwelling meets that home-use condition and is rented fewer than 15 days, the special rule generally excludes that rental income and disallows rental-expense deductions. “Under 15 days is always tax-free” leaves out the home-use condition. For longer rentals of a dwelling used as a home, allocation and income-based deduction limits matter; the same IRS guidance explains those branches.

A calendar changes the example

Suppose a hypothetical vacation dwelling has 120 fair-rental days, 20 personal-use days and 225 vacant days in 2025. These total 365. Assume the vacant days contain no personal use and there are no other special-use facts.

Ten percent of 120 is 12. The greater of 14 and 12 is 14 days, and 20 personal days exceed it. The dwelling therefore meets the home-use test in this example.

Gross rent is USD 18,000. Shared utilities cost USD 7,000, and separately identified direct rental operating costs are USD 2,000. For this preliminary allocation of shared utilities, use rental days divided by total days actually used: 120 ÷ (120 + 20) = 6/7. The vacant days do not become rental-use days in this calculation.

The shared-utility rental portion is USD 7,000 × 6/7 = USD 6,000. Rent less those allocated utilities and direct costs is USD 18,000 − USD 6,000 − USD 2,000 = USD 10,000 before other deductions and limits.

This is a preliminary operating calculation. It does not establish final deductible expenses, depreciation, taxable income or a usable loss. Mortgage interest and property taxes can require different allocation/treatment questions. Do not extend the utility denominator to every expense without checking the applicable method.

Short stays and substantial services are different tests

Basic rental services generally fit Schedule E for an individual. Substantial services primarily for guests' convenience—such as regular in-stay cleaning or linen service—can require Schedule C and potential self-employment-tax analysis. Publication 527 explains the distinction. Keep a record of what was supplied and when, rather than classifying from the booking platform's name.

Passive-activity rules ask another question. Average customer use of seven days or less is an exception to the passive-rule definition of a rental activity; material participation still needs analysis. Publication 925 explains it. That exception alone does not decide Schedule C, self-employment tax or whether a loss is deductible.

Record damage payments separately

A deposit expected to be returned is different from an amount kept when a guest violates rental terms. Publication 527 distinguishes refundable and retained deposits.

In a separate hypothetical ordinary rental-repair example, an eligible repair costs USD 800 and you keep USD 500 of a damage deposit. Record the eligible USD 800 expense and USD 500 retained income separately. The economic cost is USD 300. This example excludes personal use, casualty loss and capital work; it does not classify every insurance or platform-guarantee payment.

Ask what each reimbursement covers. If the work restores a major component, improves the property or relates to a casualty, review the different rules instead of netting the payment against a generic repair line. The IRS improvement framework helps identify that boundary.

Check the right to host and the taxes on hosting

Income-tax treatment does not settle rental permission. For example, San Antonio requires a short-term rental permit for these rentals inside its city limits. That is a local example, not a permit rule for every US address. Check the property address with the relevant city/county, and confirm lease, association and insurance restrictions before offering stays.

Lodging taxes also have their own scope and collection rules. Texas guidance includes houses and rooms within hotel-tax analysis; Florida guidance describes separate local transient-rental layers. Verify what a platform collects and what registrations, returns or local payments remain your responsibility. A payout statement is not proof that every obligation was handled.

Bring the use calendar, services list, area allocation and gross-to-net settlement records to your preparer. For Canadian home rentals, Short-term rental taxes in Canada: guest damage, reimbursements, and compliance provides a separate discussion; keep the two countries' rules distinct.

Sources

Official guidance checked October 1, 2026. Federal worked examples use 2025; state figures carry their stated period.

• Publication 527: residential rental property — IRS.
• Topic 415: Renting residential and vacation property — IRS.
• Publication 925: Passive activity and at-risk rules — IRS.
• Tangible property final regulations — IRS.
• Hotel occupancy tax — Texas Comptroller.
• Local option taxes — Florida Department of Revenue.
• San Antonio short-term rentals — City of San Antonio; local permit and hotel-tax guidance checked October 1, 2026.