At some point, you’ll probably work with someone in the station who owns a rental property – and they may try to talk you into buying one, too. And hey, they’re not wrong.

With your schedules, side hustle mentality, and ability to fix just about anything, real estate investing can be a great fit for firefighters. A rental property can provide extra income now and turn into steady cash flow in retirement.

But before you sign the dotted line and throw up that “For Rent” sign, there’s something you need to understand: the tax side of owning rental property can get complicated fast.

Let’s break it down.

Short-Term Rentals (Like Airbnb and Vrbo)

Short-term rentals (STRs) are typically rented out for fewer than 30 days at a time. You’ve probably seen them pop up all over on Airbnb and Vrbo – especially in vacation areas.

They sound appealing, but the tax rules can sneak up on you if you’re not ready:

Income = Taxable

Yes, all income from an STR is taxable. But if you’re hands-on (cleaning, guest check-in, etc.), the IRS might treat it as active income – and that can mean a bigger tax bill.

THE TAX SIDE OF OWNING RENTAL PROPERTY CAN GET COMPLICATED FAST.

Self-Employment Taxes

If you’re running the place like a business (offering services, being regularly involved), you might have to pay self-employment taxes on top of income tax – ouch.

Sales and Occupancy Taxes

Some cities treat STRs like hotels. That means local taxes could apply – yes, you may be collecting and remitting taxes just like a business.

Deductions (With Limits)

Cleaning fees, repairs, supplies, and insurance are all deductible – but only in proportion to how much you rent it out. If you stay there part of the year, your deductions might shrink.

Long-Term Rentals (the Traditional Route)

Long-term rentals (LTRs) are leased for 30 days or more – often with a lease or month-to-month agreement.

They’re more predictable, often easier to manage, and way simpler at tax time:

Passive Income = Fewer Tax Headaches

LTR income is usually considered passive, which means you won’t owe self-employment tax.

Deduct It All (Well, Mostly)

Mortgage interest, property taxes, insurance, maintenance, legal fees, and even your property manager’s salary – all potentially deductible.

Losses? Maybe Helpful

Rental losses may offset other passive income or reduce your taxable income depending on your overall situation. That could be useful in a high-tax year.

Which Option is Right for You?

It depends on what you’re after:

Quick income, high involvement? STRs might work – but get ready to be a hands-on landlord (and pay more taxes).

Passive income, long-term payoff? LTRs could be the smoother ride with fewer tax surprises.

No matter what, talk to a tax pro before you buy. They can help you compare the options, run the numbers, and avoid rookie mistakes – financially speaking.

Check out Tax Services at Firefighters First Credit Union. They are here to help.