Tax Tips for Mid-Term Rental Income

Is Mid-Term Rental Income Taxable?

Yes. Rental income — including mid-term furnished rentals — is generally taxable as ordinary income on your federal tax return. You must report all rental income received, including advance rent, security deposits you keep, and any services provided by tenants in lieu of rent.

However, the IRS allows you to deduct ordinary and necessary expenses related to your rental property, which can significantly reduce your taxable income.

The 14-Day Rule — Important for Mid-Term Landlords

If you rent your property for fewer than 15 days during the year, the rental income is not taxable and you cannot deduct rental expenses. This is the IRS "vacation home" rule.

For mid-term rentals of 1–3 months, you will almost certainly exceed 14 days of rental activity — meaning your income is taxable but your deductions fully apply. This is actually beneficial because the deductions available to you are substantial.

Deductions You Can Take

This is where mid-term landlords can significantly reduce their tax burden. Common deductible expenses include:

Operating Expenses

• Mortgage interest (if the property is mortgaged)
• Property taxes
• Property insurance premiums
• Utilities paid by the landlord (electricity, water, gas, trash)
• Internet service included in the rental
• Repairs and maintenance
• Property management fees
• Platform fees (listing fees paid to rental platforms)
• Advertising and marketing costs
• Legal and professional fees (lease preparation, tax prep)
• HOA fees

Depreciation — The Big One

Depreciation is often the largest deduction available to rental property owners. The IRS allows you to deduct the cost of your rental property over 27.5 years (residential property). This is a non-cash deduction — you get the tax benefit without spending additional money.

For a property with a depreciable basis of $275,000, you can deduct $10,000 per year simply from depreciation. Consult a CPA to properly calculate your depreciation deduction.

Furnishings and Equipment

Furniture, appliances, and equipment you purchase for your rental can be deducted. Under Section 179 and bonus depreciation rules, you may be able to deduct the full cost in the year of purchase rather than depreciating over multiple years. This is a significant benefit for mid-term landlords who invest in furnishings.

Travel Expenses

Travel to your rental property for maintenance, inspections, or tenant check-ins is deductible. Keep a mileage log or use an app to track these trips throughout the year.

Record Keeping Is Everything

The IRS requires you to keep records supporting your rental income and deductions. Good records protect you in an audit and ensure you capture every deduction you're entitled to.

What to keep:

• All rental agreements and leases
• Records of all rental income received
• Receipts for all expenses (repairs, supplies, utilities)
• Bank statements for your rental property account
• Mileage logs for property-related travel
• Records of furnishings and equipment purchased
• Security deposit records

Use accounting software like QuickBooks, Wave, or even a dedicated spreadsheet to track income and expenses monthly. This makes tax time significantly easier.

State and Local Taxes

In addition to federal taxes, many states and cities impose taxes on rental income or require landlords to collect and remit lodging taxes (similar to hotel taxes) on short and mid-term rentals.

Florida, for example, has a state sales tax on rentals of 6 months or less. Check your state and local requirements carefully — failure to collect and remit these taxes can result in significant penalties.

The QBI Deduction

If your rental activity qualifies as a business (rather than passive investment), you may be eligible for the Qualified Business Income (QBI) deduction, which allows you to deduct up to 20% of your qualified rental income. This is a complex area of tax law — consult a CPA to determine if you qualify.

When to Work With a CPA

A good CPA who specializes in real estate can often save you far more than their fee in taxes. Consider working with one if:

• You own more than one rental property
• Your rental income exceeds $25,000/year
• You have significant expenses or improvements
• You're unsure about depreciation calculations
• You operate in multiple states