Hi everyone! So we just bought our first vacation rental in January and went live on airbnb in March and we are doing so well we think we can use the money we made over the spring and high season this summer for a downpayment for another one this fall! We have to pay room tax in Ocean City, Maryland where our beach house is located every month. State and federal tax is not taken out automatically so we will have to pay that at the end of the year. So here is my question, if our cost, loss and depreciation is more than our profit, will we not have to pay state, federal tax and will we get a tax return of what we have paid for our room tax. By the end of the year will will have paid out $5,000-$7,000 in room tax. I want to know if I am going to get that back. Im trying to figure out how much we will have to put down on our next house and getting that room tax back would help a TON! Thanks everyone!
I am NOT an accountant. I do have STRs in other states and they have their own version of that tax. It is never refunded, as it’s usually a pass through tax paid by the guest (at least in my areas).
My accountant also depreciates things so it looks like I’m at a loss for the year so I owe zero state income tax in the state mine are owned and the only tax I pay is the pass through (and maybe fed- not sure how that one works)
I don't expect a refund either. I'm being charged To Help pay for Vegas, new Raider Stadium.
I can 😘 that 💰 goodbye.
I second mike’s answer and experience. Room tax would/should never be refunded. It’s like a sales tax. A charge on out of towners. Also as he stated, most sites espoused automatically collect the room tax from the renter as they would probably be on the hook if you didn’t pay it. But no, you will not have to pay state income tax if that property operated at a loss.
$7,000 in tax. I can already tell it's a monster of a property.
Good job. Maybe we should keep this a secret.
For me days of $200 a 🚪 is long gone.
Thanks for letting me know! Im pretty sure I wont need to pay states and federal tax but wasnt sure if room tax would come back to us if we had a loss that went beyond state and federal tax amount. It would have been great to see that money back since it could be used for our next renovation!
I may be misunderstanding your question, but I wanted to be sure you aren't confusing the "room tax" or sales tax with income tax?
If your location requires a city/county/state sales or hotel-type tax (i.e. your "room tax") you will need to pay that regardless of whether your property operates at a loss or not. Those taxes are usually collected from the guest and the paid to the appropriate authorities...a "pass-through" cost, like a cleaning fee. And as others have mentioned I've never heard of anyone getting a refund for those taxes paid...ever. LOL
But as @Bill Brandt mentioned you should not have to pay "income tax" (state or federal) if the property operated at a loss.
Congratulations on your success in Ocean City, MD! I grew up in that area and have great memories of our family renting a cottage on the beach in the summers.