Renting Out Your Home: What Every Homeowner Should Know

Many homeowners today are choosing to rent out their properties as a way to generate extra income, offset rising housing costs, and take advantage of the growing demand for flexible living options. With travel trends shifting toward vacation rentals and remote work allowing people to live anywhere for short periods, renting out a home has become not only a practical financial move but also a way to meet today’s lifestyle needs. For some, it helps cover a mortgage; for others, it is a strategy to build wealth or keep a property occupied while they are away. Ultimately, renting out a home today blends financial opportunity with the evolving way people live, travel, and work. However, there are several important things to consider before you decide to rent out your home.

Short-Term Rentals vs. Long-Term Rentals

When most people think of renting, they picture tenants with a year-long lease. Short-term rentals (like Airbnb or VRBO) are very different. Guests may stay just a weekend, a week, or perhaps a month. Long-term rentals, on the other hand, last for months or years and usually involve unfurnished spaces, tenant protections, and stable income.

Because short-term rentals operate more like vacation stays, the rules for taxes, expenses, and even insurance can be quite different from traditional renting.

How Taxes Work

Tax rules for short-term rentals can be tricky, and many owners get them wrong. Whether your rental income is treated like normal rental income or like business income depends on three main things:

Length of stay – If most guests stay a week or less, tax law may not treat it as a typical rental.
Services you provide – If you offer extras such as daily cleaning, meals, or concierge-type help, the government may view your property as more of a hotel.
Your involvement – If you personally handle bookings, guest messages, cleaning, and repairs, you’re considered much more active than someone who hires a manager to do it all.

In other words: If you mainly provide the space plus basics like Wi-Fi and cleaning between guests, you’ll usually report the income like a rental property. If you run it like a mini-hotel with daily services and staff, your income is treated as business income, which can mean extra taxes.

Active vs. Passive Income

Once the tax rules are sorted, the next question is whether your rental counts as “active” or “passive.”

Passive: You aren’t very involved and let a property manager handle most tasks. Losses (spending more than you earn) may be harder to use to reduce your taxes.
Active: You manage the property yourself—responding to guests, arranging cleanings, making repairs. In this case, losses are easier to use to offset other income.

Think of it this way: the more hands-on you are, the more likely your rental is considered active.

Vacation Homes You Also Use

Things get more complicated if the property is a vacation home you also use. You’ll need to split expenses between personal use and rental use.

For example, if you use the home yourself for one month and rent it for three months, about 75% of your expenses may be deductible as rental costs.

There’s also a special rule: if you rent the property out for 14 days or fewer in a year, you don’t have to report the income at all. But in that case, you also can’t deduct the expenses.

Keep Good Records

Whether you’re renting full-time or part-time, it pays to treat your property like a business. That means:

Tracking how many days it’s rented vs. how many days you use it yourself.
Keeping receipts for all expenses—repairs, supplies, services.
Logging the hours you spend managing the property.

Having solid records can protect you if the IRS ever asks questions.

Be Mindful of Local Rules

Your city or county may have its own requirements for short-term rentals. Some places require permits, special “hotel” or “occupancy” taxes, or limit how many nights you can rent out your property. It’s important to check these rules before you start—violations can result in fines or restrictions on your ability to host.

Insurance Considerations

Standard homeowner’s insurance often doesn’t cover short-term rentals. If you plan to host guests, talk to your insurance company or look into a special policy for vacation rentals. This ensures you’re protected if something goes wrong during a guest’s stay.

Final Thoughts

Renting out your home can be a smart way to earn extra income, but it’s not as simple as listing it online. How long guests stay, what services you provide, and how involved you are all affect how your rental is taxed and regulated.

Before you jump in, ask yourself:
Am I just offering a space, or will I provide hotel-like extras?
Will I manage the property myself or hire someone else?
Do I plan to use the property personally as well?
What local rules or permits apply where I live?

Answering these questions—and talking to a tax or financial professional—can save you from costly surprises and help make your rental experience both smooth and profitable.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only. Please consult your financial, tax, and estate planning professional regarding your specific situation.