Airbnb and short-term rentals: Schedule E or C, and the 14-day rule

Short-term rental income is reported like any other rental unless you provide services for your guests' convenience, which moves it onto a business schedule. In Texas there is a second tax on top, collected from the guest rather than paid out of your profit.

The one exception that removes the whole question

Start here, because for some hosts it settles the entire year. Where a dwelling unit counts as your residence and you rent it out on fewer than fifteen days in the year, none of that rental income is reported and none of those costs come off as rental expenses. The money does not appear on the return at all.

Using the place as a residence is the condition, and it has a definition. You are treated as using a dwelling unit as a residence if your personal use during the year runs to more days than the greater of fourteen days or a tenth of the days it was rented out to others at a fair rental price. In practice, the homeowner who lives in the house all year and rents it for two weeks around a big event sits squarely inside the exception. The host who rents most of the year and stays a weekend does not.

Schedule E or Schedule C: the services test

In the ordinary case, rental income and expenses go on Schedule E, whatever the length of the stays. What moves a rental to Schedule C is not a short booking. Schedule C generally takes over in two situations: where substantial services are provided alongside the property, and where the renting is itself part of a trade or business carried on as a dealer in real estate.

Substantial services means services provided primarily for your tenant's convenience: regular cleaning during a stay, changing linen, maid service. The counterweight matters just as much, because most hosts are on that side of the line. Furnishing heat and light, cleaning public areas and collecting trash are not substantial services.

The distinction carries a cost. Income from renting real estate generally stays out of the net earnings on which self-employment tax is figured, and meets the passive activity limits instead. A rental pushed onto Schedule C by substantial services can pick up self-employment tax that it would not have carried on Schedule E. Schedule C and Form 1099-NEC cover how that tax is figured; it is not restated here.

A room versus the whole place

If the unit is used for both rental and personal purposes, a spare room or a house you also live in, you generally split the total expenses across the two uses, in proportion to the days each use accounts for. Only the rental share belongs on Schedule E, and the rental expenses you can take are held to the gross rental income limitation, with some of the excess able to be carried forward to a later year.

The personal share is not wasted. If you itemize, the personal portion of mortgage interest and property taxes can still be deducted on Schedule A, which Form 1098 explains.

Depreciation, in one paragraph

The building itself is not deducted when you buy it; it is written off over a fixed recovery period. That write-off is usually the largest number on the schedule, and it lowers the rental income you report now. It comes back when you sell, because it has reduced what the property cost you for tax purposes. Your first rental property carries the recovery period, the repairs-versus-improvements test and the loss allowance.

Texas hotel occupancy tax

Texas taxes short stays much the way it taxes hotel rooms, and most hosts learn this late. Owners, operators and managers must collect the state hotel occupancy tax from guests renting a room or space that costs $15 or more each day, and the tax reaches well past hotels and motels: bed and breakfasts, condominiums, apartments and houses are all covered. Someone leasing their own house collects it from the guest in the same way a hotel collects it from a guest.

The state rate is 6% of the cost of the room. Returns are filed monthly and are due on the twentieth day of the month following the month they cover, and a filer who qualifies may report quarterly instead. A local hotel tax can sit on top of the state one: cities may impose it, and so may certain counties and special purpose districts, with the local taxing authority doing the collecting. That rate comes from the city or district rather than from the state.

Settle one thing before your first booking. A management company, an online travel site or another third-party rental firm may carry the collection duty as well, which is not the same as a promise that yours is doing it. Confirm with the platform and with the Comptroller who is collecting and remitting, and keep your own record either way.

The forms that arrive, and what to keep

What the platform sends you is a payout summary and, if you cross the reporting threshold, a Form 1099-K. Neither one is your books. Form 1099-K covers what the form is, and the 1099-K thresholds covers which threshold applies to which year.

Keep four things for as long as they could matter: nights rented against nights you used the place yourself, cleaning and supply receipts, the platform's fee statements, and a record of the hotel tax you collected and remitted. The first of those is the one nobody keeps and everybody needs, because both the fifteen-day exception and the expense split are counted in days.