When renting out a property on VRBO, you must have come across various additional fees. These include a 5% service fee on the total reservation cost, which can encompass additional charges.
Understanding these financial obligations is crucial for you to manage your stay with VRBO effectively.
In this article, we will be discussing VRBO taxes And fees thoroughly so that you do not have any problem using VRBO in future when you want to book your stay with them.
What are VRBO Taxes?
Navigating the tax landscape on VRBO is crucial for both hosts and guests. Knowing the types of taxes you may encounter and understanding how they apply to vacation rentals on the platform can save you time and ensure compliance with legal obligations.
1. Understanding Taxes on VRBO
When you host or book a property on VRBO, the platform provides an automated tax collection and remittance in certain jurisdictions.
This means that VRBO collects and remits lodging tax on your behalf when transactions are made through its system.
Yet, you’re still responsible for managing and reporting your taxes accurately, especially in areas where VRBO doesn’t handle them directly.
Detailed information about managing your lodging taxes can be found directly on VRBO’s help section.
2. Types of VRBO’s Taxes Charged
Here’s a concise list of potential taxes that may be charged on VRBO transactions:
- Sales Tax: Applicable in most jurisdictions and calculated as a percentage of the rental fee.
- Lodging Tax: Similar to hotel taxes, these are specific to short-term rentals and can vary by location.
- Occupancy Tax: Imposed in some cities or regions for stays under a certain length.
Additionally, as VRBO is a US-based company, hosts might be subject to rental income tax on US-sourced income, for which VRBO might prepare tax forms using details provided by the hosts.
What is VRBO Fee Structure?
Understanding the VRBO fee structure is important for both hosts and guests. It affects your overall rental cost and the profitability of your listing.
1. Service Fees
When you book a vacation rental through VRBO, you’re typically charged a service fee. This is a percentage of the total booking cost, excluding taxes and refundable deposits.
The fee contributes to the operation of VRBO’s platform, covering secure transactions and customer support. The exact percentage can vary based on the details of your reservation.
2. Booking Fees
Booking fees are primarily targeted at hosts, charged as a 5% commission of the booking subtotal, which includes the nightly rate and any other fees for the reservation, excluding taxes.
For example, if your rental subtotal is $1,000, expect a commission fee of $50. Some countries might also include additional charges such as GST, which is calculated on the commission rate.
3. Other VRBO Fees
There are various other fees that might affect your VRBO experience. For hosts, these can include payment processing fees and, in some cases, comparison tools to optimize pricing strategies against competitors like Airbnb.
Guests should be aware of possible lodging taxes, which are required by law in certain locations and can vary based on the booking’s jurisdiction. These taxes are often itemized separately in the payment details.
What is Tax Compliance for VRBO Hosts?
When renting out your property on VRBO, staying current with tax compliance is essential.
It involves understanding how taxes are collected, knowing your obligations as a host, and navigating the local tax laws.
1. Tax Collection and Remittance
VRBO simplifies the tax collection and remittance process in certain jurisdictions by handling it directly through the platform.
This means taxes related to your rental income could be automatically collected from your guests and paid to the relevant tax authorities on your behalf. It’s important to check if VRBO provides this service in your area.
Compiled information from the “Tax by jurisdiction” page on VRBO’s help site:
United States of America (USA)
- US (A-E): Where Vrbo collects and remits taxes and lodging taxes
- US (F-M): Where Vrbo collects and remits taxes and lodging taxes
- US (N-Z): Where Vrbo collects and remits taxes and lodging taxes
Canada
- Canada: Where Vrbo collects and remits taxes and lodging taxes
Mexico
- Mexico: Where Vrbo collects and remits taxes and lodging taxes
Europe
- Europe: Where Vrbo collects and remits taxes and lodging taxes
When bookings are made in a jurisdiction where Vrbo’s liable for lodging tax, they identify the amount of tax collected and remit it to the jurisdiction. This tax is remitted on a tax return filed with the jurisdiction under the taxpayer account of HomeAway.com, Inc.
Your name, jurisdiction tax ID, company name, address, and/or other details specific to your property aren’t identified on the tax return filing because the tax information provided identifies HomeAway.com, Inc. as the taxpayer.
The transaction details may be made available to the taxing jurisdiction upon audit and pursuant to the appropriate legal process.
If your jurisdiction contacts you and wants information related to taxes that we’re collecting and remitting, please refer the taxing authority to VRBO.
You should check the reporting requirements for your specific jurisdiction(s) or consult your tax professional to avoid penalties for not reporting.
Check what’s been paid to your jurisdiction through the lodging tax report in your partner dashboard by selecting Reservation manager > Financial reporting > Stay tax tab.
2. Host Tax Obligations
As a host, you’re responsible for managing your tax obligations. This includes reporting rental income to the IRS and any relevant state and local tax authorities.
VRBO may require your taxpayer information to generate necessary tax forms, and if you’re a non-U.S. resident, you may have to provide additional documentation to avoid withholding taxes.
3. Local Tax Regulations
Each jurisdiction has specific lodging tax requirements that you, as the host, need to adhere to.
This could involve registering with local tax agencies, obtaining permits or licenses, and filing tax returns. Always update yourself with your local tax laws to ensure compliance.
What are The Guest Information on Taxes and Fees in VRBO?
When booking a vacation rental on VRBO, understanding the taxes and fees included in your payment is crucial for budgeting your trip.
1. Breakdown of Charges
Your payment to VRBO is comprised of several components. Aside from the base rental rate, here’s what you typically encounter:
- Rental Rate: The nightly, weekly, or monthly cost set by the property owner.
- Service Fee: A fee charged by VRBO to cover the costs of running the platform, which includes secure transactions and customer service. The fee is usually a percentage of the rental rate.
- Cleaning Fee: A one-time charge for cleaning the property post-departure.
- Additional Fees: These may include pet fees, extra guest fees, or security deposits.
2. Tax Inclusions in Pricing
VRBO handles tax collection and remittance in certain jurisdictions, streamlining the process for you as the guest. The taxes you are likely to see are:
- Sales Tax: State or local tax on goods and services.
- Lodging Tax: Sometimes referred to as occupancy, room, or hotel tax, it applies specifically to the cost of renting accommodation.
Taxes are typically included in the payment confirmation, making it easy for you to review what you’re being charged for.
In some cases, VRBO will send detailed information when they start to collect and remit lodging taxes in your area.
“Tax Inclusions in Pricing” section on VRBO’s help site:
- For bookings made after the date VRBO begins collecting and remitting taxes in a jurisdiction, guests will see a separate “Lodging Tax” charge added to their total payment amount.
- For bookings made before the tax collection date but with check-in after, the host remains responsible for collecting and remitting taxes.
- VRBO collects all applicable taxes at the time of booking regardless of any split payment schedule.
- Guests can find their lodging tax amount and receipt in the Payments detail and invoice on the booking confirmation.
- For lodging tax refund requests, hosts should direct guests to contact the VRBO team.
How to Manage Taxes and Fees on VRBO?
Successfully managing your property listing includes understanding how to handle taxes and fees. On VRBO, there are specific steps you need to follow to ensure you’re compliant and transparent with your guests.
1. Setting Up Tax Rates
On VRBO, you may be responsible for setting up and managing your own tax rates. To do this, you need to determine the local tax rates and requirements in your area.
You can leverage the platform’s guidance to manage your lodging taxes effectively. This involves selecting the ‘Tax collection options’ in your account settings and entering the tax percentage to be applied to your bookings.
2. Update Fee Settings
VRBO allows you to customize the fees associated with your property listing. Navigate to your Fee Settings under the ‘Settings’ menu to view and adjust your standard fees.
Here, you can specify up to three fees, such as cleaning fees or additional guest fees. For each fee, select the fee type and enter the exact amount. Remember to save any changes to ensure your fee settings are updated.
What are the steps to calculate vRBO taxes and fees as a Guest?
As a guest looking to calculate the taxes and fees for a Vrbo property, follow these steps:
- Select Your Property: Choose the property you are interested in on Vrbo’s website or app.
- Enter Dates and Number of Guests: Input your check-in and check-out dates, and the number of guests to see the base price for your stay.
- View Detailed Price Breakdown: Look for a link or a button that says “View details,” “Price breakdown,” or similar, which should be visible on the property listing or during the booking process. Click on this to see a detailed breakdown of costs.
- Review Nightly Rate: The nightly rate will be listed, multiplied by the number of nights you plan to stay.
- Check Additional Fees: Listings often include additional mandatory fees set by the host, such as cleaning fees, extra guest fees, pet fees, or resort fees. These will be listed separately in the price breakdown.
- Examine Service Fee: Vrbo charges a service fee to guests, which is a percentage of the total booking amount (excluding taxes and refundable security deposits). This fee will be listed in the breakdown.
- Look for Taxes: Taxes will be itemized in the price breakdown. These are calculated based on the rental cost, mandatory fees, and sometimes the service fee, depending on local tax laws.
- Identify Refundable Damage Deposit: If applicable, a refundable damage deposit may be listed. This is not a fee but a deposit held to cover any potential damage during your stay.
- Calculate Total Cost: Add up the nightly rate, additional fees, service fee, and taxes to get the total cost of your stay. The refundable damage deposit is not included in this total as it is returned to you after your stay, barring any damages.
- Consider Optional Costs: If there are any optional costs (like equipment rentals or optional services offered by the host), decide if you will utilize them and add them to your total cost.
- Review Final Quote: Once you proceed to the booking or inquiry stage, Vrbo will provide a final quote that includes all applicable fees and taxes. Review this quote carefully before confirming your booking.
Note: If you have questions about the fees or how they are calculated, you can message the host directly through the VRBO platform before booking.
FAQs
1. Refund Policies and Taxes
When it comes to refund policies and taxes on VRBO, it’s important that you’re clear on how these work together.
If a guest cancels a reservation, taxes collected may be refunded depending on the lodging tax refund policies specified by the platform.
Remember, any taxes VRBO collects and remits are done so in accordance to local jurisdiction requirements.
2. Tax Deductions for VRBO Hosts
For tax deductions, as a VRBO host, you’re operating a business, which means certain expenses related to your rental may be deductible.
These can include maintenance costs, service fees, and supplies. Each locality has unique tax implications, so it’s essential to consult with a tax professional or refer to local regulations like Tax by jurisdiction provided by VRBO for specifics.
