Ohio Vacation Rental Tax Guide - Avalara MyLodgeTax (2023)

Airbnb and Vrbo have changed the way vacationers travel. More and more guests are choosing to rent private homes rather than book hotels. With a bounty of popular destinations including Cleveland, Cincinnati, and Columbus, the Buckeye State offers prospective short-term rental hosts the opportunity to bring in extra income and meet new people.

But new income opportunities bring new tax implications. Like hotel and B&B stays, short-term rentals in Ohio are subject to tax. Tax authorities require short-term vacation rental hosts to collect applicable short-term rental taxes from their guests and remit them to the proper authorities.

Failure to comply with state and local tax laws can result in fines and interest penalties. These may not catch up with vacation rental operators in the short term, but the sharing economy is under increased scrutiny so it’s important to address compliance before tax authorities address it for you.

Avalara MyLodgeTax has put together this guide to help you comply with Ohio short-term rental tax laws. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

No short-term vacation rental tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your vacation rental questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Ohio tax laws.

Short-term rental tax basics

When you start operating a short-term rental, while you might not have experience with lodging taxes, you’re probably familiar with income tax. It’s important to understand the difference between the two.

Income tax is reported and paid annually to the federal government and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.

Lodging tax on a short-term rental is a percentage of the cost of your guest’s stay that’s added to the price on the bill. The guest pays the tax, but you’re responsible for collecting the tax and paying it to the proper tax authority.

What’s the definition of “short-term rental” in Ohio?

For tax purposes, short-term rentals in Ohio are defined as stays ofless than 30 days.

(Video) Understand short-term rental lodging tax - MyLodgeTax

Who’s required to collect and file taxes on short-term rentals in Ohio?

If you offer five or more sleeping rooms for short-term rental, you're likely responsible for collecting, filing, and remitting sales taxes to the Ohio Department of Taxation. Tax authorities on the local level may have different rules.

Location is key to compliance

The location of your rental is a crucial piece of information for short-term rental tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.

Use our lodging tax lookup tool to get a rate report specific to your Ohio rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.

It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.

Registering with tax authorities

Before you can begin collecting taxes on your short-term rental in Ohio, you’re legally required to register with the Ohio Department of Taxation. You can register online, and once you’ve registered, you’ll receive a vendor’s license as well as instructions on filing your lodging taxes.

If all your transactions go through a short-term rental marketplace that is collecting lodging taxes for you, you are not required to register with the state or collect state lodging taxes.

Depending on your jurisdiction, you may be required to register with your local tax authority and file local occupation tax returns in addition to state registration and filing.

Do I need to form an LLC?

In Ohio, you don’t need to form an LLC to register with tax authorities.

(Video) Avalara MyLodgeTax

Local short-term rental regulations

Short-term rental operators in Ohio should be aware of the local regulations that apply to them, including rules covering:

  • Legality
  • Permits, licenses, and registration
  • Zoning
  • Advertising
  • Neighborhood notification
  • Building and housing standards

Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of short-term rental policies that apply to your property.

Collecting short-term rental tax

Once you’ve registered with tax authorities, you’re ready to start collecting rental tax, which you’ll add to your guest’s bill when they pay for their stay.

Which taxes apply to Ohio short-term rentals?

In Ohio, a number of different lodging taxes may apply to your short-term rental, depending on your location. These can include:

Tax rates

Before you can begin collecting short-term rental taxes, you need to know the correct rate to charge. Rates can and do change frequently, so it’s critical to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues.

Our lodging tax lookup tool can give you a rate report specific to your Ohio address. The report includes the estimated total tax rate to collect from guests, required registrations, frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.

(Video) MyLodgeTax and Vrbo

What charges are taxable?

In Ohio, the total amount charged for a room and food is subject to state sales tax if the establishment offers five or more sleeping rooms for short-term rental. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. Local tax authorities may have their own requirements.

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects taxes for me?

Before collecting any short-term rental taxes from your guests, you need to be aware of whether any taxes have already been collected for you. In Ohio, marketplaces are required to collect lodging taxes from guests when a short-term rental is paid for. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities.

Are guests ever exempt from taxes?

There are situations in which you aren’t required to collect lodging taxes in Ohio. For example, a guest who rents for a long term rather than a short term will be exempt from short-term lodging taxes.

In Ohio, purchases of accommodations by organizations including the U.S. government, Ohio state government, other state governments that exempt sales to the state of Ohio, charities, churches, and nonprofit organizations may be exempt from short-term lodging taxes. Exemption certificates may be required. Local tax authorities may have their own requirements.

Filing short-term rental tax returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Ohio Department of Taxation. In Ohio, you can file returns online. In order to file, you’ll need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due. The Ohio Department of Taxation allows credit card payments, but you may be charged convenience fees for this type of payment.

Take the time to double-check your returns prior to submitting. Simple mistakes such as typos, missing signatures, and incorrect tax information can lead to unwanted delays.

When do I need to file my returns?

(Video) Add your rental ownership info - MyLodgeTax

You’ll be assigned a filing frequency and due dates when you register with the tax authority. For filing with the Ohio Department of Taxation, sales tax due dates are as follows:

I didn’t rent my property during this filing period. Am I still required to file a tax return for my short-term rental with the Ohio Department of Taxation?

Yes. Short-term rental operators registered with the Ohio Department of Taxation are required to file returns each assigned filing period, regardless of whether there was any short-term rental income or any short-term rental taxes were collected. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.

Are there penalties for filing taxes late?

Whether you choose to offer short-term rentals through a marketplace like Airbnb or Vrbo or directly to guests, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses not in compliance with tax laws. Failure to register with tax authorities and file short-term rental tax returns in Ohio on time may result in late fees, interest payments, and in extreme cases, legal action.

I’ve been offering short-term rentals without collecting lodging tax. What options do I have?

If you’re already operating a short-term rental but you’re not collecting short-term rental taxes, you may be in violation of Ohio tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.

Short-term rental hosts in Ohio may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the Ohio Department of Taxation. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.

Are there options for outsourcing lodging tax filing?

Yes. Numerous short-term rental hosts in Ohio file several state and local lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.

(Video) Report Airbnb and Vrbo revenue - MyLodgeTax

FAQs

Do you have to pay taxes on rental income in Ohio? ›

Rental income is taxed as ordinary income in Ohio so the percent you will be taxed is based on whichever tax bracket you fall into. However, your operating expenses such as mortgage interest, property taxes, maintenance, and other expenses can be deducted from your taxable income to reduce how much you owe in taxes.

Is vrbo rental income taxable? ›

Airbnb, HomeAway, VRBO, FlipKey and similar companies are required to withhold 28% of your rental income if you don't provide them with a W-9 form. In most cases, the tax on your rental income will be less than 28%.

What is the lodging tax in Ohio? ›

In Ohio, state and local sales taxes also apply to lodging. The state occupancy tax is collected in lieu of the state sales tax at a rate of 6 percent. Counties other than Phila delphia and Allegheny are authorized to impose a hotel room rental tax (maximum rate of 5 percent) in addition to the state occupancy tax.

Is venue rental taxable in Ohio? ›

Sales –- You are required to collect and remit sales tax on all sales including rentals, except for sales of food for consumption off the premises where sold.

Do you pay tax on rental income or rental profit? ›

You're only taxed on the profit you earn – this is your total rental income minus any allowable expenses. Allowable expenses generally include anything you spend maintaining and managing your property, including: Letting agent fees. Landlord insurance.

Do you pay tax on rental income as a landlord? ›

As a landlord, you pay tax on your net rental income, which means your total income minus any allowable expenses.

How do taxes work on a vacation rental? ›

If your vacation rental is utilized as a rental for 15 days or more in a year, you can file deductions. If it is used for 14 days or fewer, you do not need to file the income as it is considered a personal rental. Always provide online booking platforms with a W-9 form.

What is the short-term rental tax loophole? ›

What is the short-term rental loophole? The short-term rental loophole provides for an exception to the definition of rental activity if the average stay period is seven days or less.

Is Airbnb income considered rental income? ›

Regardless of whether you receive a Form 1099-K, the rental income you earned from Airbnb is reportable on Form 1040, unless the non-taxable rental exception applies (discussed below). It is important to note that the gross amount reported to you will exceed the actual amount paid-out by Airbnb.

Are hotels tax exempt after 30 days in Ohio? ›

I am staying for an extended length of time, will I be tax exempt? Yes, if you are staying on property for over 30 days consecutively then you will then be considered a long term stay and sales and occupancy tax no longer apply.

What is the tax called when you stay in a hotel? ›

The Transient Occupancy Tax (TOT) is a tax of 12% of the rent charged to transient guests in hotels/motels, including properties rented through home sharing services like Airbnb, located in the unincorporated areas of Los Angeles County. The TOT is commonly known as a “bed tax”.

What is considered a lodging expense? ›

Lodging expenses are the costs for an overnight stay, usually in a hotel, that may be taken as a federal income tax deduction if the Internal Revenue Service's criteria are met. Lodging expenses are usually a business expense that is incurred when someone must travel away from their tax home to do business.

Is rental income considered business income in Ohio? ›

Generally, rents and royalties, regardless of the source, are nonbusiness income and thus are not eligible for the Business Income Deduction. However, rent and royalty income generated as part of a trade or business or by property that is an integral part of a trade or business operation may be business income.

Is rent free accommodation taxable? ›

If accommodation is given to an employee by an employer in a hotel then the income tax chargeable on this particular perquisite is calculated by deducting the rent that the employee pays to his or her employer from 24% of the employee's income or salary or the actual lease amount paid to the hotel, depending on which ...

Do taxes include rental expenses? ›

You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them.

How does the IRS know if I have rental income? ›

Ways the IRS can find out about rental income include routing tax audits, real estate paperwork and public records, and information from a whistleblower. Investors who don't report rental income may be subject to accuracy-related penalties, civil fraud penalties, and possible criminal charges.

How much rental income is exempt from tax? ›

A person will not pay tax on rental income if Gross Annual Value (GAV) of a property is below Rs 2.5 lakh. However, if rent income is a prime source of income then a person might have to pay the taxes.

Is rental income earned income or investment income? ›

Rental ownership is an investment, not a business, if you do it to earn a profit, but don't work at it regularly and continuously—either by yourself or with the help of a manager, agent, or others.

What are the new tax rules for rental property? ›

From April 2022 tax on dividends increased by 1.25%. This means if you pay the basic tax rate, you will now pay 8.75% tax on dividend payments, those paying a higher rate of tax will pay 33.75%, and additional rate taxpayers will pay 39.35% on dividends.

What tax is charged on rental income? ›

Calculate Income Tax at 40% on your rental income, including any that goes towards mortgage interest. Work out 20% of your mortgage interest to give you the tax relief amount you'll receive. Deduct the tax relief amount from the Income Tax you pay on rental income.

What happens if you don't declare rental income? ›

What happens if I don't declare rental income? If HMRC suspects a landlord has been deliberately avoiding tax, it can reclaim 20 years' worth of tax payments. They can also impose fines up to the total value of any unpaid tax, as well as the underpaid tax.

What is the 7 day rule? ›

The 7-day rule is a general rule of thumb for vacation rental owners trying to keep the deductible losses to zero for their taxes. If a property is rented for an average of 7 days or less then owners will be eligible for tax-deductible losses.

Is a vacation rental passive income? ›

Vacation rental properties have been booming over recent years, and short-term rentals are bringing in passive income to those who own them.

What is the seven day rule for vacation homes? ›

One of the most restrictive rules you must comply with is the "7 day rule". If a vacation rental is rented on average for 7 days or less, your deductible losses are normally limited to zero. To avoid limitation, you should rent your property for an average period of MORE THAN 7 days.

Are short-term rentals active or passive income? ›

Rental properties are generally considered a passive activity, and if you don't qualify for one of the exceptions (qualifying as a materially participating real estate professional for example) your net passive rental losses can only offset income from other passive activities.

Can you write off depreciation on a short-term rental? ›

Investors with short-term rental properties can still use depreciation deductions to recoup the cost of their real estate; however, short-term rental depreciation rules differ from the traditional tax strategy.

What expenses are tax deductible for short-term rental? ›

Possible deductions include:
  • Rent or mortgage on the rental property.
  • Maintenance costs, including cleaning.
  • Utilities.
  • Insurance on the rental property.
  • Property fees on the rental property.
  • Property taxes on the rental property.
  • AirBnB service fees.
  • Transportation and travel fees associated with the property.
Jul 14, 2022

What is the tax treatment of Airbnb income? ›

You do not need to pay Airbnb tax on the money you make on a short-term rental, so long as you rent out your property for 14 days or less during the year you will not owe any taxes to the federal or state government. This is only applicable if you yourself use the property for at least 14 days in the year.

How do I report rental income on Airbnb? ›

Generally you should report rental income and expenses on Schedule E. You should list information for each property that was rented during the tax year.
...
To find Schedule E go to:
  1. Federal Section.
  2. Income.
  3. Profit or Loss from Rentals and Royalties (Reported on Schedule E)

Does vrbo report rental income to the IRS? ›

Vrbo mails Form 1099-K in late January of each year. Note: For more information about Form 1099-K, read Understanding Your Form 1099-K. You will receive IRS Form 1042-S with the amount of rental income generated by your US property, and any US income tax that was withheld.

What are the usual prerequisites to being tax-exempt for hotel guests? ›

Guests who occupy a hotel room for 30 or more consecutive days with no payment interruption are considered permanent residents and are exempt from hotel tax.

Can I deduct hotel room tax? ›

The IRS allows business travelers to deduct business-related meals and hotel costs, as long as they are reasonable considering the circumstances—not lavish or extravagant.

What qualifies for tax free weekend in Ohio? ›

An item of clothing priced at $75 or less; ➢ An item of school supplies priced at $20 or less; and ➢ An item of school instructional material priced at $20 or less.

How do you avoid transient occupancy tax? ›

Any person who has a written agreement with the operator, entered into within the first thirty (30) days of the person's occupancy, which states the person will stay for more than thirty (30) consecutive calendar days is exempt from the TOT, for the first 30 days of the person's stay.

How do taxes work on VRBO? ›

Generally, taxes are applied to the rental amount (money or value) paid from the traveler, including any owner fees (like a cleaning fee or pet fee). Refundable damage deposits are generally not taxable but can become taxable in certain jurisdictions if the deposit is not fully refunded.

What are Airbnb occupancy taxes? ›

What are occupancy taxes? Occupancy taxes, also commonly known as lodging tax, room tax, hotel tax, or tourist tax, are taxes that hosts and property managers are required to collect from guests then pay to state and/or local tax authorities when operating a short-term rental.

What are the three types of lodging? ›

Lodging accommodations fall into 3 distinct categories: hotels, vacation rentals, or outdoor lodging.

What is not considered a travel expense? ›

Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can't deduct expenses that are lavish or extravagant, or that are for personal purposes.

What is difference between lodging and boarding expenses? ›

The main difference between boarding and lodging is that boarding refers to the provision of both accommodation and meals while lodging refers to the provision of accommodation.

How is income taxed on rental property in Ohio? ›

Rental income is taxed as ordinary income in Ohio so the percent you will be taxed is based on whichever tax bracket you fall into. However, your operating expenses such as mortgage interest, property taxes, maintenance, and other expenses can be deducted from your taxable income to reduce how much you owe in taxes.

What is the difference between rental income and business income? ›

For example, rental income is a common type of nonbusiness income. However, if you're in the business of renting personal property, then rental income would be considered business income.

Does vacation home rental qualify for Qbi? ›

Check out the TCJA overview! Vacation or other short-term rentals are usually not considered a trade or business. Therefore, any activity coded as such will not be included in the Section 199A calculations for the Qualified Business Income Deduction (QBID).

Is income from letting a room taxable? ›

You can choose to opt into the Rent a Room scheme – in which case you need to let HMRC know this on your Self Assessment and claim your Tax-free Allowance. If you prefer not to opt in, you simply record your income and any associated expenses on the property pages of your Self Assessment return.

Is rental income considered taxable income? ›

All rental income must be reported on your tax return, and in general the associated expenses can be deducted from your rental income. If you are a cash basis taxpayer, you report rental income on your return for the year you receive it, regardless of when it was earned.

What is the treatment of rent free accommodation? ›

Valuation of Rent Free Accommodation

The value calculated will be increased by- 10% p.a. of the cost of furniture if owned by employer or actual hire charges table in case the furniture is taken on hire. Any charges recovered from the employee shall be deducted. In cities having a population- 1.

What is the short term rental tax loophole? ›

What is the short-term rental loophole? The short-term rental loophole provides for an exception to the definition of rental activity if the average stay period is seven days or less.

How much can you write off on a rental property? ›

Although there's a limit on the property tax deduction ($10,000, or $5,000 if married filing separately, for property taxes and either state and local income taxes or sales taxes combined) — that limit doesn't apply to business activities. Internal Revenue Service. Publication 527 (2022), Residential Rental Property.

What are the tax benefits of owning a rental property? ›

Main tax benefits of owning rental property include deducting operating and owner expenses, depreciation, capital gains tax deferral, and avoiding FICA tax. In most cases, income from a rental property is treated as ordinary income and taxed based on an investor's federal income tax bracket.

How do I avoid paying tax on rental income? ›

Tips on How to Reduce Tax on Rental Income
  1. Recent tax changes for landlords. ...
  2. Claiming all expenses. ...
  3. Creating Joint Ownership. ...
  4. Form a limited company. ...
  5. Reducing through Extending. ...
  6. Short-term Tenants. ...
  7. Utilizing all available tax-bands. ...
  8. Utilize mortgage interest by changing to an offset buy-to-let mortgage.
Jul 4, 2022

How much rent income is not taxable? ›

A person will not pay tax on rental income if Gross Annual Value (GAV) of a property is below Rs 2.5 lakh. However, if rent income is a prime source of income then a person might have to pay the taxes.

Do I need a license to be a landlord in Ohio? ›

A real estate license is requiredyou are a person who, for another and for a fee, operates, manages, rents, offers, or attempts to operate, manage, or rent, other than as a custodian, care- taker, or janitor, any building or options of build- ings to the public as tenants.

What costs can I deduct from rental income? ›

Allowable expenses for landlords explained
  • Office costs. Office costs include expenses like your phone, broadband bills, and office equipment. ...
  • Travel costs. ...
  • Marketing. ...
  • Fees to professionals. ...
  • Insurance. ...
  • Fees for services. ...
  • Repairs and replacements. ...
  • Property charges.
Dec 19, 2022

What is Section 24 of income tax Act loophole? ›

Section 24 Tax only affects private Buy to Let landlords who are higher rate tax-payers. This is because finance costs are no longer regarded as a legitimate business expense for private landlords. Instead, a tax credit of 20% of finance costs is applied to reduce your tax bill.

Is Airbnb rental qualified business income? ›

The IRS considers rental income as passive so it usually doesn't qualify for QBI. This applies if your property is rented for a year or more and there is little interaction between landlord and tenant. However, Airbnb hosts can usually avoid this label, as long as their rental activities constitute a business.

Is rental income considered active income? ›

Rental income from associated corporations is an active business income if the associated corporation is engaged in an active business. As previously mentioned, all the allowable expenses can be deducted. There is no need to complete schedule 7 if there is no other property income for a corporation.

What is counted as rental income? ›

You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them.

How much tax do you pay on income from a rental property? ›

Capital gains tax rates for property

If you only pay the basic rate of income tax (20%), you'll be charged 18% on any capital gain from selling buy-to-let property. If you pay the higher or additional rate of income tax (40% or 45%), you'll be charged 28% on any gains from buy-to-let property.

How do you calculate rental income? ›

To calculate, first multiply the monthly rent amount by the number of months in the year to determine the income from rent; then, divide the income from rent by the appreciated home value. For example, if the monthly rent is $900, the total income from rent for the year would equal $10,800.

What a landlord Cannot do in Ohio? ›

Not disturb, or allow your guests to disturb, your neighbors. Not allow controlled substances (such as drugs) to be present on the property. Allow your landlord reasonable access (upon 24 hours' notice) to the premises to inspect, make repairs or show the property to prospective buyers or renters.

Do landlords have to paint between tenants in Ohio? ›

In Ohio, no state law requires landlords to paint according to any schedule. Still, of course, many landlords do so because it is easier to market their rental properties to prospective tenants.

How long can a landlord leave you without air conditioning Ohio? ›

They must keep cool without air conditioning. Ohio law mandates that landlords keep homes at a certain temperature during the winter, usually around 68 degrees. However, there is no such law for the summer. That means renters are often on their own to find cooling options.

Videos

1. AIRBNB HOSTS: How to Deal with Local Tax (what to do when they don't collect tax for you)
(STR University)
2. Rob Stephens – Tax Law for Short Term and Vacation Rentals
(Juan Vargas - Commit to Wealth)
3. Short Term Rental Tax Pro Tips with Natalie Kolodij
(The Nuts and Bolts of Real Estate)
4. All About Short-Term Rental Taxes (Lodgify Webinar)
(Lodgify)
5. 281: Tax Implications & Short-Term Rentals with MyLodgeTax's Rob Stephens
(The Hartman Media Company)
6. Ep145 - Vacation Rental Taxes Made Simple with Rob Stephens
(House Dudes Podcast Real Estate Investing)
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