Key West STR Tax Guide: What Airbnb Hosts Need to Know in 2026
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Key West is one of the most tightly regulated and highest-demand STR markets in Florida — licenses are capped and hard to obtain, the combined transient rental tax can exceed 15%, and yet properly licensed historic homes and conch cottages routinely command $300–$500/night year-round. If you hold or are acquiring a Key West transient license, this guide covers everything from tax layers to island-specific deductions.
Key West STR Licensing: The BPAS System
Key West uses a Building Permit Allocation System (BPAS) that historically capped the total number of transient (STR) licenses in the city. This system was designed to preserve the residential character of Key West neighborhoods and limit tourism-driven displacement of long-term residents.
Why this matters for buyers: Properties with existing transient licenses command a premium because new licenses are not freely issued. When purchasing a Key West property specifically for STR use, verify that the existing license transfers with the property and confirm its current good standing with the City of Key West Planning Department.
Distance requirements: Key West has distance requirements between transient rental units in some zoning districts to prevent over-concentration. Your property's specific zoning designation determines what's permitted.
Transient rental licenses in Key West do not automatically transfer with property sales in all cases. Always confirm license transferability and the specific conditions before closing on a Key West STR purchase. Losing the transient license significantly reduces the property's rental income potential.
Key West Transient Rental Tax Structure
Key West STR hosts face a layered tax structure. The combined effective rate on transient accommodation revenue typically falls between 13–15%.
| Tax Layer | Rate | Remitted To |
|---|---|---|
| Florida State Sales Tax | 6.0% | FL Dept. of Revenue |
| Monroe County TDT | 5.0% | Monroe County Tax Collector |
| Key West City Transient Tax | ~4.0% | City of Key West |
| Combined Effective Rate | ~13–15% | Multiple agencies |
Airbnb collects and remits Florida state sales tax and Monroe County TDT for platform bookings. The Key West city-level transient tax collection status by platform may vary — confirm with the City of Key West Finance Department whether platform collection covers city taxes or if you must remit separately.
For a full overview of Florida STR taxation, including the Florida DBPR licensing requirement, see our Florida STR tax guide.
Key West Market Snapshot
ADR: $300–$500/night for standard conch cottages and historic homes; $600–$1,200+/night for waterfront, pool properties, and premium Old Town locations.
Key demand events:
- Fantasy Fest (October): A massive 10-day event that drives rates to 2–4x normal. One of the highest-revenue weeks of the year.
- Spring Break (March): High demand from college travelers and families.
- Hemingway Days (July): Moderate demand boost.
- Winter season (December–March): Strong snowbird and cold-weather escape demand.
Year-round market: Unlike northern beach markets that go quiet in winter, Key West has genuine year-round demand. Even summer — technically the "off-season" — maintains meaningful occupancy due to the island's appeal and proximity to the Dry Tortugas.
Key Deductions for Key West STR Hosts
Hurricane and Wind Insurance
Key West sits at the southern tip of the Florida Keys — directly in the path of Atlantic hurricanes. Wind, hurricane, and flood insurance is non-negotiable and often very expensive for island properties. These premiums are fully deductible operating expenses. Annual insurance costs for a Key West cottage can run $8,000–$20,000+ depending on the property's age, construction, and location relative to flood zones.
Historic Property Maintenance
Key West has an abundance of historic Conch-style homes and Victorian cottages. These properties require specialized maintenance — authentic materials, licensed contractors familiar with historic district requirements, and more frequent attention to wood siding, tin roofs, and Bahama shutters. All maintenance costs are deductible as ordinary business expenses. Restoration work that adds to the property's value is a capital improvement, depreciated over 27.5 years.
Pool and Tropical Landscaping
A pool is nearly mandatory for competitive Key West listings. Weekly pool service ($150–$300/month), annual resurfacing, and tropical landscaping maintenance are all deductible. The hot, humid climate means more frequent pest control, exterior painting, and wood treatment costs compared to mainland properties.
Air Conditioning
Key West's year-round tropical climate means AC runs constantly. Electricity bills can run $400–$800/month for a well-equipped Key West cottage. HVAC maintenance, repairs, and replacement are fully deductible.
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Guest Amenities
Key West guests paying $300–$500/night expect stocked kitchens, quality linens, bicycles or scooters for local transportation, and curated island guides. Guest amenity supplies, bicycle maintenance, and welcome gifts are deductible. Bicycles and scooters provided for guest use are depreciable assets (typically 5-year schedule).
Property Management
Many Key West owners are not local. Professional property management companies charging 20–30% of gross revenue handle guest communications, turnovers, and maintenance. These fees are 100% deductible.
Florida's zero state income tax means your entire net profit from Key West STR activity is only subject to federal taxes. At peak rates, that's a saving of $3,000–$10,000+ per year compared to operating in a high-income-tax state. Track your net income carefully to optimize your federal tax position.
Florida DBPR License Requirement
In addition to the Key West city transient license, all Florida STR operators must hold a Florida DBPR (Department of Business and Professional Regulation) Vacation Rental License. This state-level license requires annual renewal and must be displayed on all advertising. The DBPR license number must appear on your Airbnb listing page.
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Disclaimer
This article is for informational purposes and does not constitute tax, legal, or financial advice. Tax rules vary based on your specific situation, filing status, entity structure, and jurisdiction. Always consult a qualified CPA or tax professional for guidance on your specific tax situation. IRS rules and thresholds are subject to change — verify current requirements at irs.gov before filing.