Educational information only, not tax advice. Rules and figures change — confirm your situation with a qualified Minnesota tax professional before filing.
Minnesota · USA · Short-term rental taxes
Short-Term Rental Taxes in Minnesota
STR income in Minnesota is subject to federal and state income tax, plus Minnesota Sales Tax and applicable local lodging taxes on gross rental receipts for stays under 30 nights.
The 30-Second Answer
- Minnesota Sales Tax of 6.875% applies to all STR charges (including cleaning fees) for reservations of 29 nights or fewer — platforms like Airbnb collect and remit this on your behalf for bookings they facilitate.
- Local Sales & Lodging Taxes of 0.5%–3.0% (and an additional 3% Duluth Lodging Excise Tax in Duluth) stack on top of the state rate — check your city or county for the exact rate.
- Net rental profit is reported on your federal Schedule E (or Schedule C if you provide substantial services) and on your Minnesota Form M1 state income tax return.
- The 14-day rule (Master's Exception) lets you exclude rental income from federal income tax if you rent for 14 days or fewer per year AND personally use the property for more than 14 days — but Minnesota Sales Tax still applies to those rentals.
Deductions
What Minnesota STR Hosts Can Deduct
Ordinary and necessary expenses directly related to your rental activity are generally deductible against rental income — keep receipts for everything.
If you use the property personally as well as for rental, expenses must be allocated between personal and rental use based on the number of days each use occurs. Consult a tax professional for mixed-use properties.
Filing Calendar
Key Dates & Filing Calendar
Minnesota STR hosts face both state income tax and sales tax filing deadlines — missing a sales tax due date can trigger penalties.
If you are not using a platform that collects and remits sales tax on your behalf, you must register with the Minnesota Department of Revenue and file your own sales tax returns.
Minnesota Department of Revenue — Sales: Residential Short-Term Rentals (updated May 15, 2024): revenue.state.mn.us
Income Tax Treatment
How Is Your STR Profit Taxed? Schedule E vs. Schedule C
Unlike some countries, the US does not offer a flat-rate or allowance-based alternative — your STR income is taxed on net profit, but the form you use depends on the services you provide.
Schedule E (Passive Rental)
Standard rental income reporting for most hosts
- Report gross rents and deduct allowable expenses to arrive at net rental income or loss
- Net income taxed at your ordinary federal income tax rate (10%–37%) plus Minnesota state income tax (5.35%–9.85%)
- Passive loss rules may limit how much of a rental loss you can deduct against other income
- No self-employment tax on Schedule E rental income
No income ceiling
Schedule C (Active Business)
Required if you provide hotel-like services to guests
- Net profit is subject to self-employment tax (~15.3% on first $176,100 for 2025) in addition to income tax
- Losses may be deductible against other income if you materially participate
- Allows deduction of a wider range of business expenses
- Most casual STR hosts do NOT reach this threshold — consult a tax professional if unsure
No income ceiling
Depreciation
Depreciation for Minnesota STR Properties
The IRS allows you to deduct the cost of your rental property and furnishings over time — depreciation is often the largest single deduction for STR hosts.
| Asset | Typical write-off period | Notes |
|---|---|---|
| Residential rental building | 27.5 years (straight-line) | Land is not depreciable; only the building value qualifies. Allocate purchase price between land and structure. |
| Furniture, appliances & fixtures | 5–7 years (MACRS) | May qualify for 100% bonus depreciation in year one under current federal rules — check current-year IRS guidance. |
| Carpeting & flooring | 5 years (MACRS) | Treated as personal property if easily removed; otherwise may follow building depreciation schedule. |
| Roof, HVAC, structural improvements | 27.5 years (straight-line) | Qualified improvement property may have a shorter recovery period — consult a tax professional. |
Minnesota conforms to federal depreciation rules for most purposes. Depreciation is recaptured when you sell the property.
When you sell your STR property, the IRS taxes previously claimed depreciation at up to 25% (unrecaptured Section 1250 gain). Minnesota also taxes this gain at ordinary state income tax rates.
Minnesota Lodging Taxes
State & Local Lodging Taxes on Minnesota STRs
Every STR booking under 30 nights is subject to Minnesota Sales Tax plus any applicable local taxes — rates vary by city and county.
Minnesota imposes its general Sales Tax rate on STR charges, and many cities and counties layer on additional local sales taxes and lodging excise taxes. The example below shows a typical Minneapolis-area booking.
Up to ~9.875%+ depending on location (state + local combined)
Airbnb Help — Occupancy tax collection and remittance by Airbnb in Minnesota; MN Dept. of Revenue Revenue Notice #17-06 (2017); City of Duluth Finance Department
| Booking type | Who collects & remits | What it means for your books |
|---|---|---|
| Airbnb-facilitated booking | Airbnb collects state sales tax (6.875%) and most local taxes from the guest and remits directly to MN Dept. of Revenue | You generally do not need to remit these taxes yourself for Airbnb bookings — but verify your local jurisdiction is covered |
| VRBO / direct booking | Host is responsible for collecting and remitting all applicable state and local taxes unless the platform confirms it remits on your behalf | Register with MN Dept. of Revenue, collect tax from guests, and file Form ST-1 on your filing schedule |
| Duluth bookings (any platform) | Airbnb remits the 3% Duluth Lodging Excise Tax; for other platforms, host must remit to City of Duluth Finance Dept. | Track Duluth bookings separately; confirm your platform's remittance coverage with the city |
Tax rates and platform remittance agreements can change. Always verify current rates with the Minnesota Department of Revenue and your local city or county finance office before each filing period.
Platforms
How Airbnb & VRBO Handle Minnesota Taxes
Major platforms collect and remit Minnesota Sales Tax on facilitated bookings, but income reporting to the IRS depends on your transaction volume.
| Platform | Reports your income | Collects the local lodging tax | Annual earnings summary |
|---|---|---|---|
| Airbnb | 1099-K if >$20,000 gross & >200 transactions (2025); 1099-MISC for bonuses ≥$600 | Yes — collects & remits MN state sales tax (6.875%) and most local taxes including Duluth 3% excise tax | Available in host dashboard by January 31 |
| VRBO / Vrbo | 1099-K if above IRS threshold | Partial — check VRBO's tax remittance page for your specific Minnesota city/county | Available in host account by January 31 |
| Direct / other platforms | No automatic IRS reporting (income still taxable) | No — host must collect and remit all state and local taxes | Host must maintain own records |
Hosting on Multiple Platforms?
If you list on both Airbnb and VRBO (or take direct bookings), aggregate all gross income across platforms when calculating your total taxable rental income. The 1099-K threshold applies per platform, but the IRS expects you to report all income regardless of whether you receive a 1099.
US Information Reporting (not DAC7)
DAC7 is a European Union directive and does not apply in Minnesota or the US. The equivalent US rule is IRS Form 1099-K reporting by Third Party Settlement Organizations (TPSOs) such as Airbnb, governed by IRC Section 6050W.
Airbnb Help Center — US tax documents from Airbnb (2025); Airbnb Help — Occupancy tax collection and remittance by Airbnb in Minnesota
Illustrative P&L: Schedule E vs. Schedule C
Example based on a Minnesota STR earning $30,000 gross per year with $12,000 in expenses. For illustration only — not tax advice.
Record-Keeping
Stay Audit-Ready: What to Keep and How Long
Good records protect you if the IRS or Minnesota Department of Revenue questions your STR deductions or sales tax filings.
| Keep | How long | Why |
|---|---|---|
| Booking records (dates, guest names, nightly rates, platform statements) | At least 3 years from filing date (7 years if income underreported by >25%) | Proves rental days vs. personal-use days for deduction allocation and the 14-day rule |
| Receipts for all deductible expenses (cleaning, repairs, supplies, insurance) | At least 3 years from filing date | Required to substantiate deductions on Schedule E or C if audited |
| Sales tax returns (Form ST-1) and proof of remittance | At least 3.5 years (Minnesota statute of limitations for sales tax is 3.5 years) | MN Dept. of Revenue can audit sales tax filings within the statutory period |
| Property purchase documents, closing statements, and improvement receipts | Permanently (or at least 3 years after you sell the property) | Needed to calculate cost basis, depreciation, and capital gain/recapture on sale |
| Platform 1099-K / earnings summaries | At least 3 years from filing date | Cross-reference with your reported income to avoid IRS matching discrepancies |
Minnesota's sales tax audit window is generally 3.5 years from the due date of the return. The IRS generally has 3 years, but 6 years if you omit more than 25% of gross income.
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 does not constitute tax advice. Tax rules change frequently — always verify current rates and requirements with the Minnesota Department of Revenue and a qualified tax professional.
- Minnesota Department of Revenue — Sales: Residential Short-Term Rentals — Official MN DOR industry guide on STR sales tax obligations, updated May 15, 2024. revenue.state.mn.us/guide/sales-residential-short-term-rentals
- Minnesota Department of Revenue — Revenue Notice #17-06 — Formal department position on who must register, collect, and remit sales tax on STR lodging. revenue.state.mn.us/revenue-notice/17-06
- Minnesota Department of Revenue — Sales: Lodging and Related Services — Defines taxable lodging, the 30-day rule, and local tax applicability. revenue.state.mn.us/guide/sales-lodging-and-related-services
- Airbnb Help — Occupancy Tax Collection and Remittance in Minnesota — Details Airbnb's collection of 6.875% MN Sales Tax, 0.5%–3.0% local taxes, and 3% Duluth Lodging Excise Tax. airbnb.com/help/article/2311
- Airbnb Help — US Tax Documents from Airbnb — Explains 1099-K, 1099-MISC, and 1099-NEC thresholds and issuance dates. airbnb.com/help/article/414
Questions
Frequently Asked Questions: Minnesota STR Taxes
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