April 6, 2026 · Duluth, MN STR Tax Guide

Duluth Short-Term Rental Tax Guide for Airbnb Hosts (2025)

Perched at the western tip of Lake Superior, Duluth is one of the Midwest's most distinctive travel destinations — a port city of dramatic topography, historic architecture, and a thriving arts scene that draws visitors year-round. For Airbnb hosts, Duluth's combination of summer tourism, fall foliage, and winter sports creates a diversified revenue stream that outperforms many comparable Midwest markets.

Hosting an STR in Duluth means navigating Minnesota's multi-layer tax structure: state sales tax, county lodging taxes, and city lodging taxes stack up to rates in the 9–12% range on gross rental revenue. Add Minnesota's income tax — which reaches 9.85% at the top bracket — and tax planning becomes essential.

Duluth STR Tax Rates at a Glance

Short-term rental stays in Duluth are subject to Minnesota's sales tax on lodging, St. Louis County's lodging tax, and a Duluth city lodging tax. The combined effective rate on lodging revenue typically runs between 9.875% and 12%.

Minnesota State Sales Tax on Lodging

Minnesota imposes its 6.875% sales tax on short-term lodging rentals (stays under 30 days). This is one of the higher base state lodging tax rates in the Midwest. Airbnb is a registered marketplace facilitator in Minnesota and collects/remits this tax for transactions processed through their platform.

If you rent through VRBO, direct bookings, or other channels, you must register with the Minnesota Department of Revenue (MN DOR) and collect/remit sales tax yourself. Registration is free and done online through MN DOR's e-Services portal.

St. Louis County and Duluth City Lodging Taxes

St. Louis County imposes a 3% lodging tax on short-term rentals. This tax funds tourism marketing and regional economic development. The City of Duluth additionally imposes a 3% city lodging tax. Together, these local taxes add 6% on top of the state rate.

Minnesota State Income Tax

Unlike Washington or Texas, Minnesota has a significant state income tax. Net rental income from your Duluth STR is subject to MN income tax on Form M1. Minnesota's graduated rates for 2024:

• 5.35% on first ~$30,000 (single filer)
• 6.8% on $30,001–$99,000
• 7.85% on $99,001–$183,000
• 9.85% on income above $183,000

Minnesota generally conforms to federal depreciation rules, meaning bonus depreciation elections you make on your federal return carry through to your MN return as well.

Duluth STR Licensing Requirements

Duluth enacted a Short-Term Rental ordinance that requires all STR operators to obtain a city license. Key requirements include:

• Annual STR license from the City of Duluth (fees vary by property type)
• Property must meet minimum safety standards (smoke detectors, CO detectors, egress windows)
• Host contact information must be posted on or near the property
• Registration with MN Department of Revenue for sales tax purposes
• Compliance with Duluth's noise and parking ordinances

The Duluth STR Market

Duluth benefits from an unusually diverse tourism draw that distributes occupancy more evenly across seasons than most resort markets. This makes it an attractive target for investors seeking year-round rental income.

Seasonality and Revenue

• Summer (June–August): Canal Park, waterfront, lake activities; ADR $175–$275/night; occupancy 75–85%
• Fall (September–October): Superior Hiking Trail, fall foliage; ADR $160–$250/night; occupancy 65–75%
• Winter (December–February): Spirit Mountain skiing, Bentleyville Tour of Lights; ADR $150–$225/night; occupancy 50–60%
• Spring (March–May): Shoulder season; ADR $130–$190/night; occupancy 40–55%

Top Performing Areas

Canal Park and the adjacent Lakewalk neighborhood command the highest rates due to proximity to the iconic aerial lift bridge, waterfront restaurants, and the Great Lakes Aquarium. Properties with lake views or walking distance to Canal Park earn 20–30% premiums over inland comparables. The East Hillside and Congdon Park neighborhoods appeal to guests seeking residential authenticity with easy downtown access.

Key Deductions for Duluth STR Hosts

Cold Weather Operating Costs

Duluth's harsh winters create legitimate and substantial deductions not seen in Sun Belt markets:

• Heating costs: Natural gas or heating oil bills for the rental property, proportional to rental use days
• Snow removal: Plow contracts, shoveling services, salt and ice melt supplies
• Weatherization: Storm windows, insulation upgrades, pipe insulation — deductible as repairs or depreciated as improvements
• Winter damage repairs: Ice dam damage, freeze-thaw foundation repairs, roof work

Waterfront-Specific Deductions

• Lake Superior waterfront access maintenance
• Kayak, paddleboard, or canoe provided for guest use (depreciated)
• Dock maintenance and inspection fees
• Rip-rap or shoreline erosion control

Standard Rental Property Deductions

• Depreciation over 27.5 years (or accelerated via cost segregation)
• Property management fees
• Cleaning and turnover services
• Platform service fees (Airbnb, VRBO)
• Insurance (homeowner's, liability, umbrella)
• Utilities during rental periods
• Repairs and maintenance
• Mortgage interest and property taxes (proportional to rental use)

Minnesota Short-Term Rental Expense Allocation

If you also use your Duluth property personally, you must allocate expenses between personal and rental use. Minnesota follows the federal rules: use the IRS method (rental days / total days) to determine the deductible percentage of shared expenses like mortgage interest, property taxes, utilities, and insurance.

Expenses used exclusively for the rental (cleaning between guest stays, platform fees, guest supplies) are 100% deductible regardless of personal use days.

Disclaimer