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)

Vermont’s short-term-rental definition covers qualifying furnished accommodations rented for fewer than 30 consecutive days and for more than 14 days per calendar year.

Rate: 9% Vermont Rooms Tax plus the 3% short-term-rental surcharge created by Act 183 of 2024 for rents collected on or after August 1, 2024. A further 1% Local Option Rooms Tax applies only where a municipality has adopted it.

Platform bookings: Vermont makes an internet rental platform responsible for collecting and remitting the applicable state tax, surcharge, and local option tax on bookings it facilitates. Hosts still must report rental income and remain responsible for bookings outside that platform.

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 the 9% Rooms Tax, 3% surcharge, and any applicable municipal 1% Local Option Rooms Tax
3. File and pay through myVTax on the frequency assigned to the tax account
4. Keep records of all taxable rentals

Non-collection: Interest and penalties may apply to unpaid tax. Confirm account and filing requirements directly with the Vermont Department of Taxes.

Local Option Tax

A 1% Local Option Rooms Tax is collected only where applicable.

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.

No Act 48 Statewide Registration Fee

Vermont does not have the Act 48 statewide STR registry or annual per-unit registration fee previously described here. A Vermont tax account and the Division of Fire Safety’s self-certification are separate compliance requirements, not an Act 48 property registry.

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
• Vermont tax filings and applicable fire-safety documentation

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

• Online platforms handle applicable Vermont taxes for bookings they facilitate. Confirm responsibility for every other booking channel.
• 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, state requirements and how to verify current Hartford rules.
• Vermont short-term rental laws, official sources for tax and fire-safety requirements.
• Quechee, VT area overview