STR Accounting Basics: Track Income & Expenses

Proper accounting is the backbone of any profitable short-term rental operation. Yet many STR owners treat bookkeeping as an afterthought, scrambling to organize records only when tax season approaches. This reactive approach leaves money on the table through missed deductions, creates unnecessary stress, and can lead to costly errors or even IRS scrutiny.

Establishing robust accounting systems from the start transforms your STR from a hobby into a legitimate business. Good financial records enable informed decision-making, support tax optimization strategies, and provide the documentation needed for future financing or property sales. This guide covers everything you need to know about STR accounting, from basic bookkeeping principles to software selection and tax preparation strategies.

Setting Up Your STR Accounting System

Before diving into specific expenses and deductions, you need a framework for organizing your financial information. The right setup makes ongoing record-keeping manageable and ensures nothing falls through the cracks.

Separate Business Banking

The first and most important step is establishing separate banking for your STR business. Commingling personal and business funds creates accounting nightmares and can jeopardize liability protections if you operate through an LLC or corporation.

• Dedicated checking account: Open a separate checking account exclusively for STR income and expenses. All rental revenue should deposit here, and all business expenses should be paid from this account.
• Business credit card: Use a dedicated credit card for STR purchases. This simplifies expense tracking and often provides rewards on common STR spending categories.
• Reserve account: Consider a separate savings account for tax reserves, typically holding 25-30% of net income to cover quarterly estimated payments and annual tax liability.
• Operating reserve: Maintain three to six months of operating expenses in accessible reserves for unexpected repairs, vacancy periods, or seasonal slowdowns.

Chart of Accounts

A chart of accounts organizes your income and expenses into categories that align with tax reporting requirements. For most STR operators, the following structure provides adequate detail:

Income Categories:

• Rental Income (gross booking amounts)
• Cleaning Fees Collected
• Pet Fees
• Other Guest Fees
• Damage Reimbursements

Expense Categories:

• Platform Fees (Airbnb, VRBO service fees)
• Cleaning Services
• Supplies (toiletries, paper goods, consumables)
• Utilities (electric, gas, water, internet, trash)
• Insurance
• Property Management Fees
• Maintenance and Repairs
• Lawn and Landscaping
• Mortgage Interest
• Property Taxes
• HOA Fees
• Furnishings and Equipment
• Professional Services (accounting, legal)
• Marketing and Advertising
• Travel (property visits)
• Software and Subscriptions

Tracking Income Accurately

STR income tracking seems straightforward but presents unique challenges. Platform payouts do not always align cleanly with booking dates, service fees are deducted before payment, and various booking sources may report income differently.

Understanding Platform Payouts

Airbnb, VRBO, and other platforms typically pay hosts 24 hours after guest check-in, though timing can vary. The amount received reflects gross booking revenue minus platform service fees. For tax purposes, you need to track:

• Gross booking revenue: The total amount the guest paid, before any platform deductions.
• Platform fees: Service fees charged by booking platforms, which are deductible business expenses.
• Net payout: The amount actually deposited to your bank account.

Platforms provide year-end tax documents (Form 1099-K) reporting gross transactions. Your records must reconcile with these documents, which is easier if you track gross revenue and platform fees separately rather than only recording net payouts.

Direct Booking Income

If you accept direct bookings, income tracking requires additional attention:

• Record full booking amounts at time of payment
• Track payment processing fees (Stripe, PayPal, etc.) separately
• Document any discounts or promotional pricing applied
• Maintain detailed records since no platform 1099 will be generated

Occupancy and Lodging Taxes

Many jurisdictions require collection and remittance of occupancy or lodging taxes. Proper tracking is essential:

• Platform-collected taxes: Some platforms collect and remit taxes on your behalf. These amounts should not be counted as income since they are pass-through collections.
• Host-collected taxes: When you must collect and remit taxes directly, track these amounts separately from rental income and ensure timely remittance to avoid penalties.
• Documentation: Maintain records of all tax collections and remittances for audit protection.

Expense Tracking Best Practices

Comprehensive expense tracking maximizes deductions while providing the documentation needed to substantiate them if questioned. Many STR owners significantly underreport expenses simply because they fail to capture and categorize all legitimate business costs.

Real-Time Recording

The most effective expense tracking happens in real time, not during annual tax preparation. Implement systems that capture expenses as they occur:

• Mobile receipt capture: Use your accounting software's mobile app or a dedicated receipt scanning app to photograph and categorize receipts immediately.
• Automated bank feeds: Connect business accounts to accounting software for automatic transaction import and categorization.
• Weekly review routine: Set aside 15-30 minutes weekly to review and categorize any uncategorized transactions.

Commonly Overlooked Deductions

STR operators frequently miss legitimate deductions in these areas:

• Vehicle expenses: Track mileage for property visits, supply runs, and contractor meetings. The standard mileage rate provides substantial deductions for hosts who drive to their properties regularly.
• Home office: If you manage your STR business from home, a portion of home expenses may be deductible. This is separate from and in addition to deductions on the rental property itself.
• Education and professional development: Courses, books, conferences, and other educational expenses related to STR operation are deductible.
• Software subscriptions: Property management software, pricing tools, accounting software, and other business subscriptions.
• Bank and payment fees: Monthly account fees, wire transfer charges, and payment processing fees.
• Professional services: Accounting, legal, and consulting fees related to your STR business.
• Photography: Professional photos for listings are a deductible marketing expense.

Capital Expenditures vs. Repairs

Understanding the distinction between repairs and capital improvements affects how expenses are deducted:

• Repairs: Costs that maintain property in its current condition are fully deductible in the year incurred. Examples include fixing a leaky faucet, repainting walls, or replacing a broken appliance with a similar one.
• Capital improvements: Costs that add value, prolong useful life, or adapt property to new uses must be capitalized and depreciated over time. Examples include adding a deck, replacing all appliances with upgrades, or major renovations.

Accounting Software Options

Modern accounting software dramatically simplifies STR bookkeeping. The right choice depends on your portfolio size, technical comfort, and specific needs.

QuickBooks Online

QuickBooks remains the industry standard for small business accounting with good reason. For STR operators, it offers:

• Robust reporting capabilities
• Bank feed integration with most financial institutions
• Mobile app for receipt capture and on-the-go management
• Integration with many STR-specific tools
• Accountant access for tax preparation

The Simple Start plan ($30/month) works for single-property owners, while multiple properties may require Essentials ($60/month) or Plus ($90/month) for project or location tracking features.

Stessa

Stessa is purpose-built for rental property accounting and offers a compelling free tier. Key features include:

• Property-centric organization
• Automatic income and expense tracking
• Tax-ready reporting (Schedule E)
• Performance dashboards and analytics
• Document storage for each property

The free tier covers most needs, with premium features available for $20/month.

Wave

Wave offers free accounting software with features comparable to entry-level paid options:

• Unlimited income and expense tracking
• Bank connections and receipt scanning
• Financial reporting
• Invoice creation

Wave generates revenue through optional payment processing and payroll services, allowing core accounting features to remain free.

Spreadsheet Alternative

For hosts with single properties and simple operations, a well-designed spreadsheet can suffice. If using this approach:

• Use a template designed for rental property accounting
• Update regularly, ideally weekly
• Back up files to cloud storage
• Maintain separate tabs for each month and annual summaries
• Plan to migrate to dedicated software as you scale

Monthly and Annual Accounting Tasks

Consistent attention to accounting prevents year-end scrambles and ensures accurate financial visibility.

Monthly Tasks

• Bank reconciliation: Verify that all transactions are recorded and categorized, matching your records to bank statements.
• Platform reconciliation: Confirm platform payouts match your booking records and expected amounts.
• Expense categorization: Review and categorize any transactions not automatically handled.
• Receipt filing: Ensure all expense receipts are captured and stored appropriately.
• P&L review: Generate and review monthly profit and loss statements to track performance.

Quarterly Tasks

• Estimated tax payments: Calculate and submit quarterly estimated tax payments if required.
• Occupancy tax remittance: Submit any occupancy taxes not handled by platforms.
• Performance analysis: Compare quarterly results to previous periods and projections.
• Budget review: Assess actual performance against budget and adjust forecasts.

Annual Tasks

• Year-end close: Complete final reconciliations and ensure all transactions are properly recorded.
• 1099 collection: Gather all tax documents from platforms and financial institutions.
• Tax preparation: Work with your accountant or prepare returns with complete documentation.
• Document retention: Organize and securely store all financial records for the required retention period.
• Depreciation calculations: Update depreciation schedules for new purchases and property improvements.

Working with Tax Professionals

While basic bookkeeping can be handled independently, most STR operators benefit from professional tax preparation. The complexity of rental property taxation, including depreciation, passive activity rules, and potential real estate professional status, warrants expert guidance. For a deeper dive into maximizing your deductions, explore our STR Tax Strategies Guide.

Finding the Right Professional

Look for tax professionals with specific experience in rental property taxation:

• CPA credentials: Certified Public Accountants have demonstrated competency and are held to professional standards.
• Rental property experience: Ask specifically about experience with short-term rental clients and familiarity with STR-specific issues.
• Proactive planning: The best professionals provide year-round guidance, not just tax preparation.
• Technology comfort: Professionals who embrace modern accounting software integration simplify the preparation process.

Maximizing Professional Value

Get the most from your tax professional relationship:

• Provide organized, complete records
• Schedule mid-year planning meetings for tax strategy discussions
• Ask questions about deductions and strategies you have heard about
• Share changes in your situation that may affect tax treatment
• Request explanation of filing positions so you understand your returns