Vermont Vacation Rental Taxes: What Quechee Owners Owe

Vermont vacation rental taxes have two layers: state-level Rooms and Meals Tax, and federal and state income tax on rental income. Both are real obligations with real penalties for non-compliance. This guide covers what Quechee STR operators actually owe and how to stay current.

Vermont Rooms & Meals Tax (R&M Tax)

The Vermont Rooms and Meals Tax applies to all short-term rental income from rentals under 30 consecutive nights.

Rate: 9% of gross rental income (not net income, the tax applies to the amount the guest pays for the room, before any deductions).

Who collects it: Airbnb and VRBO collect and remit Vermont R&M Tax automatically on all bookings processed through their platforms. If your guest books through Airbnb, the tax is handled and you don’t need to do anything for those transactions.

When you handle it yourself: If you accept direct bookings, use a website that doesn’t auto-collect, or use a platform that isn’t set up to collect Vermont tax, you must:

1. Register with the Vermont Department of Taxes as a rooms and meals taxpayer
2. Collect 9% R&M Tax from guests at the time of payment
3. Remit tax to the state quarterly (filing deadlines are April 25, July 25, October 25, and January 25 for each preceding quarter)
4. Keep records of all taxable rentals

Penalty for non-collection: Vermont assesses interest and penalties on unpaid R&M Tax. The Department of Taxes actively monitors STR listings and cross-references them with tax filings. “I didn’t know” is not a defense.

Local Option Tax

Vermont municipalities can adopt a local option tax of up to 1% on rooms and meals revenue. This local option tax is collected in addition to the 9% state tax.

Whether Hartford currently has a local option tax in effect should be verified directly with the Vermont Department of Taxes or Hartford town offices, as municipalities can adopt, modify, or repeal local option taxes. Airbnb and VRBO collect local option taxes where applicable for their platform bookings.

If Hartford has adopted a local option tax and you accept direct bookings, you must collect and remit the local option tax separately from the state R&M Tax.

Vermont Act 48 Registration Fee

Vermont’s Act 48 (2024) established a statewide STR registry with an annual registration fee per unit. The registration fee is paid to the state and is separate from the R&M Tax. Current fee amounts are listed on the Vermont Department of Taxes website. This is a flat fee, not a percentage of income.

Federal Income Tax

Vacation rental income is taxable federal income. The IRS allows significant deductions against rental income that substantially reduce the taxable amount.

Allowable federal deductions for rental properties include:

• Management fees (Stay Vermont’s fee is fully deductible)
• Cleaning and maintenance costs
• Supplies (linens, toiletries, kitchen supplies replaced for guests)
• Advertising costs (your Airbnb/VRBO listing fees)
• Utilities (proportionate to rental use if you also personally use the property)
• Insurance premiums (proportionate to rental use)
• Mortgage interest (proportionate to rental use)
• Property taxes (proportionate)
• Depreciation on the building and improvements (a non-cash deduction that is often the largest single deduction)
• Repairs (fully deductible in the year incurred, not depreciated)

Personal use rules: If you use the property personally for more than 14 days per year OR more than 10% of the total rental days (whichever is greater), IRS rules require you to allocate expenses between rental and personal use. This reduces some deductions. Consult a tax professional if you use the property personally.

The 14-day rule: If you rent the property for more than 14 days per year and personal use is limited to 14 days or fewer (or 10% of rental days, whichever is less), the property is treated as a rental property and deductions are not limited by personal use.

Vermont State Income Tax

Vermont income is taxed at rates ranging from 3.35% to 8.75%, depending on total income. Vermont follows federal rules on rental income and deductions with some modifications. Vermont rental income must be reported on Vermont Form IN-111.

Vermont has a limited exception for rental income from a primary residence rented for fewer than 14 days per year (the “master bedroom exclusion”), but this is narrow and does not apply to dedicated STR properties.

Depreciation: The Most Valuable Deduction

Depreciation allows you to deduct a portion of the building’s cost each year as a non-cash expense. For residential rental property, the IRS allows straight-line depreciation over 27.5 years. For a property with a building value of $400,000 (land is not depreciable), this generates approximately $14,500 in annual non-cash depreciation deductions.

Depreciation deductions can significantly reduce taxable rental income. When you sell the property, however, depreciation is subject to recapture at ordinary income rates (up to 25% federal). A 1031 exchange allows you to defer this recapture if you’re reinvesting in another rental property.

Estimated Tax Payments

If your rental income generates a significant Vermont and federal tax liability, you may be required to make quarterly estimated tax payments to avoid underpayment penalties. The general rule: if you expect to owe more than $1,000 in federal income tax (or $500 in Vermont income tax) from rental activity, you should be making quarterly estimated payments.

Record-Keeping

Keep records of all rental income and expenses for at least seven years. This includes:

• All platform payout statements (Airbnb, VRBO, direct booking records)
• Receipts for all deductible expenses
• R&M Tax filings and payment confirmations
• Hartford STR permit and associated costs
• Act 48 registration confirmation

A property management company will provide annual income summaries that simplify tax preparation. Stay Vermont provides owners with annual income reports suitable for tax purposes.

The Short Version

• Airbnb/VRBO handles R&M Tax for platform bookings. Direct bookings: you handle it.
• Register with Vermont Department of Taxes if you have any direct bookings or off-platform rentals.
• Report rental income on federal Schedule E and Vermont Form IN-111.
• Take all allowable deductions, management fees, depreciation, and repairs are the biggest.
• Make quarterly estimated payments if the tax liability is substantial.
• Work with a CPA familiar with Vermont rental properties. The nuances (personal use, depreciation recapture, local option tax) are real and the penalties for errors are real.

Further Reading

• Quechee vacation rental management hub, full-service management, including tax-ready income reports.
• Quechee short-term rental regulations, permits, registry, and inspections that pair with these taxes.
• Vermont short-term rental laws & Act 48, the statewide registry behind the registration fee.
• How much can a Quechee Airbnb make?, gross income before the deductions covered here.
• Quechee, VT area overview