Educational information only, not tax advice. Rules and figures change — confirm your situation with a qualified Kentucky tax professional before filing.
Kentucky · USA · Short-term rental taxes
Short-Term Rental Taxes in Kentucky
Short term rental taxes in Kentucky: 6% sales tax plus the 1% state transient room tax on stays under 30 days, local room taxes up to 8.5%, and a flat 3.5% income tax on 2026 rental profit.
The 30-Second Answer
- Short term rental tax in Kentucky starts at 7%: the 6% sales tax plus the 1% statewide transient room tax on stays of fewer than 30 continuous days, charged on the full rent including cleaning, pet and other fees.
- Local transient room taxes stack on top. Louisville Metro and Lexington-Fayette charge 8.5%, the Northern Kentucky counties of Boone, Campbell and Kenton 5% in total, and Bowling Green 4%.
- Platforms handle most bookings. Airbnb and Vrbo collect the sales tax and the 1% state room tax, and hosts who rent only through platforms do not register for the state room tax. Direct bookings need your own Department of Revenue account, and Louisville hosts must register with the Metro Revenue Commission either way.
- Kentucky income tax is a flat 3.5% for 2026 (down from 4%) on net rental profit carried from Schedule E or C to Form 740, due April 15, 2027. Louisville also taxes some rental profit through its 2.2% occupational license tax.
Deductions
What Kentucky STR Hosts Can Deduct
Kentucky's flat income tax starts from your federal figures, so every rental expense you deduct federally also trims the 3.5% state tax.
Sales tax and transient room taxes you collect from guests are not your income. Either leave them out of gross rents or include them and deduct the same amount when remitted. If you also stay in the property, split costs between rental and personal days under IRC §280A.
Filing Calendar
Key Dates & Filing Calendar
Direct-booking hosts file Kentucky sales and room taxes monthly, Louisville has its own room-tax calendar, and income tax follows the April deadline.
Kentucky counts every charge in the rent — cleaning, pet, rollaway, damage and cancellation fees — for the transient room tax. Quote direct guests tax on the full total, not just the nightly rate.
Kentucky DOR — Transient Room Tax and sales & use tax due dates; Louisville Metro Revenue Commission — TR1M and OL-3 instructions
Federal & Kentucky Income Tax Treatment
Passive Rental vs. Active Business: Which Applies to Your Kentucky STR?
Your federal Schedule E or Schedule C result becomes part of Kentucky taxable income, taxed at a flat 3.5% for 2026 after the $3,360 standard deduction.
Passive Rental — Schedule E
The usual route for bourbon-trail homes and lake cabins
- Report rents and expenses on Schedule E; the net figure flows to your Form 740.
- No self-employment tax on the net rental result.
- Passive-loss rules apply; the $25,000 special allowance phases out between $100,000 and $150,000 of modified AGI.
- Depreciate the building over 27.5 years; furniture and appliances acquired after January 19, 2025 can take permanent 100% bonus depreciation.
No ceiling; Kentucky's flat 3.5% applies to every dollar of 2026 taxable income
Active Business — Schedule C
When you run it like a small inn
- Applies when the average stay is 7 days or less and you provide substantial services such as daily housekeeping or meals.
- Net profit owes 15.3% self-employment tax, with the Social Security part capped at the $184,500 2026 wage base.
- Losses can offset other income if you materially participate.
- May qualify for the federal §199A QBI deduction; local net-profits license taxes such as Louisville's 2.2% can also apply.
No ceiling; SE tax applies on top of federal and Kentucky income tax
Depreciation
Depreciation for Kentucky STR Properties
Depreciation is claimed on your federal return and carries through to Kentucky taxable income, lowering both taxes each year you rent.
| Asset | Typical write-off period | Notes |
|---|---|---|
| Residential rental building | 27.5 years (straight-line) | Land is not depreciable, so split the purchase price between lot and structure. |
| Furniture, appliances & hot tubs | 5 years (MACRS) | Items acquired after January 19, 2025 qualify for permanent 100% bonus depreciation. |
| Decks, fencing, driveways & fire pits | 15 years (MACRS) | Land improvements outside the building shell. |
| Roof, HVAC & other building improvements | 27.5 years (straight-line) | Improvements to the structure follow the building's own recovery period. |
A cost segregation study can shift parts of the property into 5- and 15-year classes for faster deductions. Get professional advice before commissioning one.
On sale, depreciation you claimed is recaptured federally at up to 25% (unrecaptured §1250 gain), and the gain is also part of Kentucky taxable income.
Sales & Transient Room Tax
Kentucky Sales and Transient Room Taxes on Vacation Rentals
Every vacation rental stay under 30 days in Kentucky carries the state sales tax and state transient room tax, plus whatever lodging tax your city or county levies.
The Kentucky Department of Revenue administers the 6% sales tax and the 1% state transient room tax. Local transient room taxes are set and collected locally — Louisville's, for example, by the Louisville Metro Revenue Commission.
7% statewide, up to 15.5% in Louisville and Lexington
Kentucky DOR — Transient Room Tax; KRS 139.200; Louisville Metro Revenue Commission; Airbnb Help Center article 2306
| Booking type | Who collects & remits | What it means for your books |
|---|---|---|
| Airbnb booking | Airbnb collects the 6% sales tax and 1% state room tax statewide, plus local room tax in Louisville, Lexington, Northern Kentucky, Oldham, Woodford and Bowling Green | Keep Airbnb's tax reports. In a town not on Airbnb's list, the local room tax may still be yours to file |
| Vrbo booking | Vrbo collects Kentucky sales & use tax, the state transient room tax and local transient room tax (exemptions vary by locality) | Check each booking breakdown to confirm the local tax was included |
| Direct booking | You collect sales tax and the room taxes from the guest and file with the Kentucky DOR and your local tax office | Register before your first direct stay and keep collected tax separate from rent |
Stays of 30 continuous days or more are excluded from the transient room tax, and the sales tax on accommodations likewise stops at 30 consecutive days. Other towns set their own occupancy rates — Oldham and Woodford counties charge 3% — so check your local tourism commission before quoting direct guests.
Platforms
Airbnb Tax in Kentucky: What the Platforms Collect
Kentucky makes companies that arrange rentals responsible for the transient room tax, so Airbnb and Vrbo cover most of it. Direct and Booking.com stays need a closer look.
| Platform | Reports your income | Collects the local lodging tax | Annual earnings summary |
|---|---|---|---|
| Airbnb | Form 1099-K above $20,000 and 200 transactions; 1099-MISC for other payments of $2,000+ | Yes — 6% sales tax, 1% state transient room tax, and local room tax in Louisville, Lexington, Northern Kentucky, Oldham, Woodford and Bowling Green | Earnings and tax reports in the host dashboard |
| Vrbo | Form 1099-K at the same federal thresholds | Yes — sales & use tax, state transient room tax and local transient room tax (exemptions vary by locality) | Annual payout summary in the owner dashboard |
| Booking.com | Depends on who processes the payment | Kentucky law puts the room tax on anyone who arranges the rental; if the guest pays you directly, collect and remit it yourself | Invoices and payout statements in the extranet |
| Direct bookings | No third-party reporting; you report all income | No — you collect and remit sales tax and room taxes | Your own ledger |
Using More Than One Platform?
Each platform remits only on its own bookings. If you mix Airbnb, Vrbo and direct stays, your DOR and Louisville returns cover only the direct ones, while Form 740 needs all of it, so keep every channel in one ledger.
US Reporting — 1099-K, Not DAC7
DAC7 is an EU directive and does not apply to Kentucky rentals. US platforms report host payouts to the IRS on Form 1099-K once gross payments exceed $20,000 and 200 transactions in a year. All rental income is taxable whether or not a form arrives.
Airbnb Help Center — Occupancy tax collection and remittance by Airbnb in Kentucky (airbnb.com/help/article/2306); Vrbo Help — Tax by jurisdiction; IRS — Form 1099-K
Illustrative P&L: A Kentucky Whole-Home Rental
Example: a Louisville-area home earning $45,000 in rents (excluding sales and room taxes paid by guests). For illustration only — not tax advice.
Record-Keeping
Stay Audit-Ready: What to Keep and How Long
Kentucky hosts can hear from the IRS, the Department of Revenue and, in Louisville, the Metro Revenue Commission — each wants its own evidence.
| Keep | How long | Why |
|---|---|---|
| Booking records (dates, nights, guest, rate, channel) | At least 3 years after filing | Shows which stays were under 30 days and taxable, and supports rental vs. personal days |
| Platform tax reports showing tax collected | At least 3 years after filing | Proves Airbnb or Vrbo remitted the sales and room taxes, so they are not owed twice |
| DOR sales & room tax returns and local TR1M filings | At least 3 years after filing | Evidence for direct bookings you reported yourself |
| Expense receipts and invoices | 3 years from filing (6 if income is understated by more than 25%) | Supports deductions that carry to Form 740 and any OL-3 |
| Closing papers, improvements and depreciation schedule | Until 3 years after you sell | Needed for basis, gain and depreciation recapture |
Keep your Louisville Revenue Commission account number and any local STR registration with your tax files. Registration is renewed annually in Louisville.
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 education only and is not tax or legal advice. Confirm current rates and requirements with the Kentucky Department of Revenue, your local tax office and a qualified tax professional before filing.
- Kentucky Department of Revenue — Transient Room Tax — 1% of rent, 30-day exclusion, facilitators must pay, Airbnb and Vrbo collect the 1% and local tax. https://revenue.ky.gov/Business/Transient-Room-Tax/Pages/default.aspx
- Kentucky TAXANSWERS — Transient Room Tax — Platform-only hosts need not register; all fees count as rent. https://taxanswers.ky.gov/Sales-and-Excise-Taxes/Pages/Transient-Room-Tax.aspx
- KRS 139.200 — Imposition of sales tax — Sales tax on accommodations furnished to transients; 30 consecutive days exempt. https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=58186
- Kentucky DOR — 2026 Withholding Formula — 2026 tax rate 3.5%; standard deduction $3,360. https://revenue.ky.gov/Forms/2026%20Withholding%20Formula.pdf
- Kentucky DOR — Sales & Use Tax due-date reminder (July 2026) — Monthly and quarterly sales & use and transient returns due the 20th. https://revenue.ky.gov/Documents/7-28-26%20%20Reminder%20Withholding%20and%20Sale%20%26%20Use%20Tax%20August%20Due%20Dates.pdf
- Louisville Metro Revenue Commission — Transient Room Tax — 8.5% rate; host registration; monthly TR1M; platform-only hosts do not file. https://louisvilleky.gov/government/revenue-commission/transient-room-tax
- Louisville Metro Revenue Commission — Form OL-3 instructions — 2.2% resident net-profits rate; short-term rentals listed; $50,000 residential exemption; April 15. https://louisvilleky.gov/sites/default/files/2024-12/ol-3_instructions_2024.pdf
- Airbnb Help Center — Occupancy tax collection and remittance by Airbnb in Kentucky — State and local taxes Airbnb collects. https://www.airbnb.com/help/article/2306
- IRS — Understanding your Form 1099-K — Federal third-party reporting thresholds. https://www.irs.gov/businesses/understanding-your-form-1099-k
Questions
Frequently Asked Questions — Kentucky STR Taxes
Mr Props Team
Property & Short-Term Rental Tax specialists
Make Tax Season a Non-Event
Mr. Props tracks your STR income, expenses and remittances all year, so your Kentucky filing is ready to file instead of reconstructed in a panic.
Join Hosts Running Smarter Portfolios
Monthly tactics on STR tax, pricing and operations — written for operators, not accountants.
No spam. Unsubscribe anytime.