Managing the taxation of short-term rentals in the IRS can seem complex, but with the right options and some planning it is possible to optimise results and keep everything within the law. In this article, we clearly explain the different types of declarations, the possible deductions and the strategies for dealing with special situations, from income in arrears to de-allocation for rental.
Stay with us and find out how to turn short-term rentals in the IRS into a real instrument of sustainable profitability.
Ways to declare income
In the context of short-term rentals in the IRS, income can be taxed in two different categories:
- Category B (self-employment): the gross amounts charged to guests are declared in field 417 of Annex B, Table 4A. The tax authorities apply a rate of 35 per cent to this amount (which can rise to 50 per cent in containment zones). It is not possible to deduct property expenses here, which simplifies filing but can increase the tax burden. For more information, see Article 31 of the CIRS.
- Category F (property income): works as if it were a traditional rental. The owner ticks ‘Yes’ in box 9 of Annex B and enters the gross income in box 15.1, while entering the eligible expenses in box 15.2. This option allows you to write off costs that reduce the tax base, and is often more advantageous for those who have a lot of expenses. For more information, see Articles 8 and 41 of the CIRS.
Expenses that you can deduct
Opting for the category F regime for short-term rentals in the IRS opens the door to various deductions, provided they are duly substantiated:
- Conservation and maintenance works on the property.
- Condominium and IMI (Municipal Property Tax).
- Cleaning and laundry services.
- Commissions charged by booking platforms (Airbnb, Booking, etc.).
- Home and civil liability insurance.
Record all invoices and keep them organised: these expenses are only accepted if they have been correctly invoiced.
Cancelled reservations and withheld amounts
When a guest cancels a reservation and the amount is not refunded, this amount is also taxed by the IRS. It must be declared in box 414 of Annex B, and the tax authorities will assess 100 per cent of that amount. Be aware of these cases to avoid surprises when it comes time to pay the tax.
De-allocation to rental housing
Turning a property used for short-term rentals into a long-term rental can bring tax benefits:
- The property must have been used for short-term rentals until 31 December 2022.
- The lease contract and the respective communication on the Finance Portal must take place by 31 December 2024.
- The exemption applies to property income earned until 31 December 2029.
This option exempts income earned as a permanent home from IRS and IRC, which can be a way of prolonging the property’s long-term viability.
Cessation of activity
If you decide to close your short-term rentals business for IRS purposes, you must notify the Tax Authority within 30 days. You can do this in person, at a tax office, or online, via the Finance Portal: Citizens > Services > Cessation of Activity.
If the termination takes place in 2024, this information must be included in Box 14 of Annex B of the personal income tax return to be submitted in 2025.
Capital gains on the sale of the property
When you sell a house that has been used as short-term rentals in the IRS, capital gains rules apply:
- If the divestment took place up to three years before the sale, 95 per cent of the capital gain enters the IRS in Category B.
- If the property has been outside the LA regime for more than three years, the general capital gains rule applies, where half of the gain is taxed under Category G.
In certain cases, a transitional regime is in place (for properties allocated in 2021), which may allow for mixed treatment between Categories B and G.
Source: DECO PROteste Investe
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