There is no national tax that affects short-term rental rather, taxes are imposed on a sub-national level. Each state and local jurisdiction within the states has the authority to impose its own short-term rental tax, this tax is referred to as occupancy tax, lodging tax, room tax, etc., depending on the location of the property. Lodging tax is a certain percentage of the total rent collected from the guest that is remitted to tax authorities. Other taxes that short-term rental owners are required to remit include the individual or corporate income tax and the sales and use tax. Although the sales and use tax are subject to US constitutional restrictions. You might have to report the rental income generated from short-term rentals for federal income tax purposes, however, you may deduct operating expenses of the short-term rental, which for most people is more than the rent they collect so that they won’t owe income tax but there are no deductions for lodging tax.

It is important that you check with the city, county, and state where your rental property is located as there may be a lodging tax at one or multiple levels of government. For instance, Maine has a statewide lodging tax of 9%, with no city or county taxes while California does not have a statewide lodging tax, rather, each city or county imposes its own tax.

Lodging taxes are typically 10% to 12% on average, with the rate often escalating in the resort and urban markets. High tax rates in big cities are very common, for instance, the short-term rental tax rate in Chicago is over 21%.

NOTE: You are required to pay taxes on all mandatory fees that you charge the guest as a condition of the rental. This typically covers all extra charges, such as cleaning fees, pet fees, credit card fees, etc. Refundable damage or security deposits are not taxable.