State Income Tax Implications for STR Hosts
No credit card required
State income tax on STR income is determined by where the property is located, not where you live. If your Airbnb property is in a state with an income tax, you owe that state's income tax on your net rental income — even if you're a non-resident. Seven states have no income tax at all, but most states do, and they don't all follow the federal rules.
States With No Income Tax
If your STR property is located in one of these seven states and you live there, you owe no state income tax on your rental income:
- Texas — No individual income tax
- Florida — No individual income tax
- Wyoming — No individual income tax
- Nevada — No individual income tax
- South Dakota — No individual income tax
- Alaska — No individual income tax
- Washington — No individual income tax (capital gains tax on investment income does exist)
Note: Tennessee and New Hampshire have historically taxed only investment income (interest and dividends), not earned income. Tennessee fully eliminated its income tax in 2022.
If you live in a no-tax state but own a STR property in a state with an income tax, you still owe that state's income tax on your STR income. The property's location determines which state gets the tax. Similarly, if you live in a state with income tax and own a STR in a no-tax state, some states try to tax your worldwide income — but must give you a credit for taxes paid to the property state.
State Conformity: Where the Differences Hit Hard
States generally start with federal taxable income and make adjustments. The most impactful differences for STR hosts:
Bonus Depreciation
Current IRS guidance describes 100% additional first-year depreciation for eligible property acquired after January 19, 2025, subject to eligibility, timing, and election rules. A blanket 60% rate for 2026 is incorrect. State treatment must be checked separately for the relevant year and taxpayer; the examples below are a starting point for that review, not a calculation for your return.
- California: Does not allow bonus depreciation at all. California has its own depreciation system and requires a separate calculation. A host who takes $50,000 in federal bonus depreciation will have $50,000 more in California taxable income.
- New York: Generally conforms to federal depreciation but has specific limitations.
- New Jersey: Has its own depreciation system with differences from federal.
- Illinois: Does not conform to bonus depreciation; requires federal depreciation addback.
Section 179 Deduction
Most states conform to the federal Section 179 expensing limit, but some cap it at lower amounts or have different phase-out thresholds. California, for example, has its own Section 179 limit that is lower than the federal limit.
QBI Deduction (§199A)
The federal 20% qualified business income deduction under §199A is available only for federal purposes. States do not have a corresponding deduction unless they specifically enacted one (none have for STR income). Your state taxable income is higher than federal by the amount of any QBI deduction you take.
Notable State-Specific Rules
California
California is particularly aggressive in its non-conformity. No bonus depreciation, lower Section 179 limits, no QBI deduction, and a top marginal rate of 13.3% on high incomes. California also has the Mental Health Services Tax (1% on income over $1 million). STR income in California must be tracked with California-specific depreciation schedules running parallel to federal.
No credit card required
Colorado
Colorado has a relatively straightforward flat income tax rate and generally conforms to federal depreciation. However, the state has been increasing STR regulation in many mountain resort towns, and some local jurisdictions have registration requirements. Colorado has a state income tax rate of 4.4% as of 2026.
Tennessee
Tennessee eliminated its Hall Tax (investment income tax) and has no individual income tax. However, Tennessee does have a business tax for certain rental activities depending on structure and volume.
If your property is in a non-conformity state (especially California), you need to maintain two depreciation schedules: one under federal MACRS with any bonus depreciation or Section 179 elections, and one under the state's rules. Your tax software should handle this, but it's worth verifying with your CPA to ensure both schedules are being maintained correctly from year one.
Non-Resident State Filing Requirements
If you own a STR in a state where you don't live, you typically must file a non-resident state income tax return in the property state. Non-resident returns tax only the income earned within that state (your STR income). Your home state taxes your worldwide income but usually gives you a credit for taxes paid to other states, preventing true double taxation.
For hosts with properties in multiple states, see our guide on handling multi-state STR income.
Prove it.
Federal and State Income Tracking in One Place
DeductFlow tracks your STR income and expenses with the detail you need for both federal and state returns, including separate categorization for state depreciation differences.
Start Your Free Trial →7-day free trial · No credit card required
Related Reading
No credit card required
Disclaimer
This article is for informational purposes and does not constitute tax, legal, or financial advice. State tax laws change frequently and vary significantly. Always consult a qualified CPA or tax professional familiar with your specific state's rules before filing. Verify current state tax requirements with your state's department of revenue.
Frequently Asked Questions
Do I have to pay state income tax on Airbnb income?
If the state where your STR property is located has an income tax, yes — you owe state income tax on your STR net income. This applies even if you live in a different state. Most states require non-resident returns for income earned within their borders from rental properties.
Which states have no income tax for STR hosts?
States with no individual income tax include Texas, Florida, Wyoming, Nevada, South Dakota, Alaska, and Washington. If your STR property is located in one of these states and you live there, you owe no state income tax on STR income. If you live in a state with income tax, your home state may still tax your out-of-state STR income.
Does California conform to federal bonus depreciation?
No. California does not conform to federal bonus depreciation under IRC §168(k). California disallows bonus depreciation and has its own depreciation schedule that differs from federal. This means your California taxable income may be higher than your federal taxable income in years when you take bonus depreciation federally.