Educational information only, not tax advice. Rules and figures change — confirm your situation with a qualified Indiana tax professional before filing.
Indiana · USA · Short-term rental taxes
Short-Term Rental Taxes in Indiana
Indiana STR hosts owe federal income tax on net rental profit, Indiana state income tax at a flat rate, and must collect state sales tax plus any applicable county innkeeper's tax on each booking.
The 30-Second Answer
- Federal income tax: Report STR net income on Schedule E (passive rental) or Schedule C (if you provide substantial services); deduct all ordinary and necessary expenses including depreciation.
- Indiana state income tax: Indiana taxes net rental income at a flat 2.95% rate (2026); file Form IT-40 (residents) or IT-40PNR (part-year/nonresidents).
- Indiana sales tax: Short-term rentals (fewer than 30 consecutive days) are subject to Indiana's 7% state sales tax, which must be collected from guests and remitted to the Indiana Department of Revenue.
- County Innkeeper's Tax: Most Indiana counties levy an additional county innkeeper's tax (rates vary by county, commonly 5%–10%); platforms like Airbnb and Vrbo collect and remit these taxes in many Indiana jurisdictions.
Deductions
What Indiana STR Hosts Can Deduct
Hosts using the actual-expense method can deduct the pro-rated share of these costs against rental income, reducing both federal and Indiana state taxable income.
Mixed-use properties (personal + rental use) require pro-rating expenses by rental days ÷ total days used. The IRS 14-day / 10% rule determines whether the property is treated as a rental or personal residence for loss-deduction purposes.
Filing Calendar
Key Dates & Filing Calendar
Indiana personal income tax follows the federal calendar; sales and innkeeper's tax filings are typically monthly or quarterly depending on volume.
Indiana offers an automatic extension to November 15 for filing the IT-40, but any tax owed must still be paid by April 15 to avoid interest and penalties.
Indiana DOR — IT-40 instructions & ST-103 filing guidance: in.gov/dor
Tax Treatment
Schedule E vs. Schedule C: Which Applies to Your Indiana STR?
The IRS classification of your rental activity drives which federal form you use and whether losses can offset other income — Indiana follows the federal classification for state purposes.
Schedule E — Passive Rental
Standard treatment for most STR hosts
- Net rental income reported on Schedule E, Page 1; flows to Form 1040 and Indiana IT-40
- Losses are 'passive' and can only offset other passive income (unless you qualify as a real estate professional or the $25,000 rental loss allowance applies)
- No self-employment tax on net income — a significant saving vs. Schedule C
- Indiana taxes the resulting net income at the flat 2.95% state rate
No income ceiling; passive loss rules apply
Schedule C — Business Income
Required when you provide hotel-like services
- Net profit reported on Schedule C; subject to self-employment tax (~15.3% on first $168,600 in 2024) in addition to income tax
- Losses may be deductible against ordinary income if you materially participate, bypassing passive loss limits
- Indiana taxes Schedule C net profit at the flat 2.95% state rate plus applicable county income tax
- Triggers quarterly estimated tax payments if annual liability exceeds $1,000 federal / $1,000 Indiana
No income ceiling
Depreciation
Depreciation for Indiana STR Properties
Depreciation lets you deduct the cost of your rental property and improvements over time — it is one of the largest tax benefits available to Indiana STR owners.
| Asset | Typical write-off period | Notes |
|---|---|---|
| Residential rental building | 27.5 years (straight-line) | Land is not depreciable; allocate purchase price between land and structure |
| Appliances & furniture | 5 years | May qualify for Section 179 expensing or bonus depreciation in year placed in service |
| Carpeting & flooring | 5 years | Classified as personal property under cost segregation; accelerated write-off possible |
| Land improvements (driveways, fencing) | 15 years | 150% declining balance method; also eligible for bonus depreciation |
Cost segregation studies can reclassify portions of a building into shorter-lived asset classes, accelerating deductions significantly in early years. Consult a tax professional before commissioning a study.
When you sell the property, the IRS recaptures depreciation previously deducted at a maximum 25% federal rate (unrecaptured Section 1250 gain). Indiana taxes the gain at the standard 2.95% flat rate.
Indiana Lodging Taxes
State Sales Tax & County Innkeeper's Tax
Indiana STR hosts must collect and remit state sales tax plus the county innkeeper's tax applicable to the property's location — rates vary significantly by county.
Indiana imposes a 7% state sales tax on short-term rentals (stays under 30 consecutive days). On top of that, most Indiana counties levy a county innkeeper's tax, which ranges from roughly 5% to 10% depending on the county. The combined rate in many markets runs 12%–17% of the rental charge.
12%–17% combined (location-dependent)
Indiana DOR — Sales Tax on Accommodations (IC 6-2.5); Indiana county innkeeper's tax authority (IC 6-9): in.gov/dor
| Booking type | Who collects & remits | What it means for your books |
|---|---|---|
| Airbnb booking (Indiana) | Airbnb collects and remits Indiana state sales tax and innkeeper's tax in participating counties directly to the DOR/county | Tax amounts appear on guest receipts; you do not remit these amounts separately for Airbnb bookings in covered jurisdictions |
| Vrbo booking (Indiana) | Vrbo collects and remits Indiana state sales tax and innkeeper's tax in participating Indiana counties | Verify your county is covered in Vrbo's remittance list; if not, you must register and remit directly |
| Direct booking (your own website) | Host is solely responsible for collecting, reporting, and remitting all applicable taxes | Register with Indiana DOR for a Registered Retail Merchant Certificate; file Form ST-103 and county returns on schedule |
Even when a platform remits on your behalf, you remain legally responsible for ensuring the correct amounts are collected. Keep platform tax remittance confirmations in your records. Some Indiana counties (e.g., smaller rural counties) may not be covered by platform agreements — verify with your county treasurer.
Platforms
How Airbnb & Vrbo Handle Indiana Tax Reporting
Both major platforms report host income to the IRS and collect lodging taxes in most Indiana jurisdictions — but your obligations differ for direct bookings.
| Platform | Reports your income | Collects the local lodging tax | Annual earnings summary |
|---|---|---|---|
| Airbnb | Issues 1099-K (if gross payments > $20,000 and > 200 transactions in 2025; lower thresholds in future years) or 1099-MISC for other payments | Yes — collects and remits Indiana 7% sales tax and innkeeper's tax in most Indiana counties | Annual earnings summary available in host dashboard by January 31 |
| Vrbo | Issues 1099-K under same federal thresholds as Airbnb | Yes — collects and remits Indiana state sales tax and innkeeper's tax in participating Indiana counties; check Vrbo's tax remittance page for your county | Annual earnings summary available in owner dashboard |
| Direct / other OTAs | No automatic IRS reporting unless you use a payment processor that issues 1099-K | No — host must register with Indiana DOR and county, collect, and remit all taxes independently | Host must maintain own records; no platform-generated summary |
Hosting on Multiple Platforms?
If you list on both Airbnb and Vrbo (plus direct bookings), aggregate all gross income across platforms for federal and Indiana state income tax reporting. Each platform issues its own 1099-K independently — do not double-count. For lodging taxes, track which platform remitted for which booking to avoid over- or under-remitting on your own returns.
DAC7 / OECD Reporting (EU Rule — Not Applicable in Indiana)
DAC7 is a European Union reporting directive and does not apply to Indiana or U.S.-based STR hosts. U.S. platform reporting is governed by IRS Form 1099-K rules under IRC §6050W.
Airbnb US tax documents: airbnb.com/help/article/414; Vrbo Indiana tax remittance: help.vrbo.com; IRS 1099-K rules: irs.gov
Illustrative P&L — Indiana STR (Schedule E)
Example: Indianapolis-area property, 180 rental nights, $150 avg nightly rate. Numbers are illustrative only.
Record-Keeping
Stay Audit-Ready: What Indiana STR Hosts Should Keep
Good records protect your deductions in an IRS or Indiana DOR audit and make annual filing much faster.
| Keep | How long | Why |
|---|---|---|
| Booking records (guest names, dates, nightly rates, platform statements) | At least 3 years after filing; 6 years if income underreported by >25% | Substantiates gross rental income reported on Schedule E / IT-40 and lodging tax returns |
| Expense receipts (cleaning, repairs, supplies, utilities, insurance) | 3–6 years | Required to support deductions claimed; IRS can disallow undocumented expenses |
| Depreciation schedules and property purchase documents (closing statement, appraisal) | Life of ownership + 6 years after sale | Needed to calculate depreciation, adjusted basis, and recapture tax on eventual sale |
| Platform tax remittance confirmations (Airbnb/Vrbo lodging tax receipts) | 3–6 years | Proves lodging taxes were collected and remitted; protects against county innkeeper's tax audit |
| Indiana ST-103 filings and county innkeeper's tax returns | 3–6 years | Indiana DOR and county treasurers can audit sales and innkeeper's tax compliance |
If you use part of your home as an STR, keep a detailed personal-use log (dates you or family used the property). The IRS 14-day / 10% rule hinges on this record — without it, you cannot prove your rental loss deduction is valid.
Estimator
Short-Term Rental Tax Estimator
Plug in your bookings and costs to see your likely taxable position.
Your Numbers
Total short-term-rental income, before costs.
Allowable running costs, mortgage interest, depreciation and platform fees.
Your top income-tax band, as a percentage.
Estimated tax owed
Income tax on your net rental profit at your marginal rate.
Illustrative estimate. A simplified model to orient you — it is not tax advice. Confirm your situation with a qualified local professional.
Sources & notes
This page is for educational purposes only and is not tax advice. Tax rates and rules change; always verify current figures with the Indiana Department of Revenue (in.gov/dor) and the IRS (irs.gov) or a qualified tax professional.
- Indiana Department of Revenue — Sales Tax on Accommodations — IC 6-2.5 imposes Indiana's 7% sales tax on short-term accommodation rentals under 30 days. in.gov/dor
- Indiana Code — County Innkeeper's Tax (IC 6-9) — Authorizes Indiana counties to levy innkeeper's taxes; rates and applicability vary by county. iga.in.gov
- Indiana DOR — Individual Income Tax (IT-40) — Indiana flat income tax rate of 2.95% for tax year 2024; rental income included in Indiana adjusted gross income. in.gov/dor
- IRS — Tips on Rental Real Estate Income, Deductions and Recordkeeping — Federal rules on rental income reporting, Schedule E, deductible expenses, and depreciation. irs.gov
- Airbnb Help Center — US Tax Documents — Explains 1099-K, 1099-MISC, and 1099-NEC issuance thresholds and timing for US hosts. airbnb.com/help/article/414
- Vrbo — Where Vrbo Collects and Remits Taxes (Indiana) — Lists Indiana jurisdictions where Vrbo collects and remits state sales tax and innkeeper's tax. help.vrbo.com
- Avalara MyLodgeTax — Indiana Vacation Rental Tax Guide — Third-party summary of Indiana STR lodging tax obligations including state and county rates. avalara.com/mylodgetax
- BNBCalc — Indiana STR Lodging Tax Guide — Overview of Airbnb and Vrbo Indiana occupancy tax obligations for STR owners. bnbcalc.com
Questions
Frequently Asked Questions — Indiana STR Taxes
Mr Props Team
Property & Short-Term Rental Tax specialists
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