TurboTax / Tax Calculators & Tips / All Tax Guides / Taxes 101 / Who Pays the Transient Occupancy Tax?

Who Pays the Transient Occupancy Tax?

Updated for Tax Year 2016


OVERVIEW

"Transient occupancy tax" is paid on temporary lodging at hotels, motels, inns, hostels and similar places. Although the name "transient occupancy tax" is specific to California, similar lodging taxes are in effect across the United States. You pay these taxes when you rent a room, bed or other space. It's the lodging operator's job to collect the tax and pay it to the government.


Defining occupancy taxes

Man with feet on the desk

Occupancy taxes apply to short-term lodging rentals, and go by many names, such as hotel tax, hotel/motel tax, lodging tax and transient room tax. The laws that impose these taxes typically define the length of stay subject to the tax. In California, for example, transient occupancy taxes don't apply to rentals longer than 30 days, a common standard.

The rental length is designed to ensure that visitors to a community pay the tax, but people living there usually do not. The laws also define what kinds of lodging count toward the tax — whether it applies only to lodging in permanent structures, or whether campgrounds and similar accommodations count, too.

 

Where occupancy tax is charged

The most recent survey of occupancy taxes by the National Conference of State Legislatures found that about 20 states have lodging taxes that apply statewide. Many of those states also allow cities and counties to tack on additional taxes. And even states without statewide lodging taxes commonly allow local versions.

For example, California's transient occupancy taxes aren't imposed statewide, but state law gives cities and counties the authority to impose them. And impose them they do: According to Consumer Reports, the taxes in Los Angeles and San Francisco both exceed 15%, while San Jose and San Diego both top 10%.

Hotel taxes can get steep. In Houston, which Consumer Reports says has the highest hotel tax in the country, the rate is 17%.

  • That's a combination of a 6% state tax, a 7% county tax, a 2% city tax and a 2% tax by the body that oversees sports venues.

The magazine also explains why they're so high: Generally, only out-of-towners pay them, and they don't vote.

Renting out your own space

Though they're often referred to as hotel taxes, short-term occupancy taxes aren't limited to commercial hotels. If you rent out your home, or a portion of your home, through a service such as Airbnb, HomeAway or VRBO, they probably apply to your situation, too.

For certain locations, the rental service that you use might collect these taxes directly from customers making reservations and forward them to the appropriate government authority. In most cases, though, you're probably responsible for collecting the taxes from customers and turning that money over to authorities. Make sure you know the rules that apply in your area.

Deductibility on income taxes

Generally speaking, hotel taxes that you pay, such as the transient occupancy tax, are not deductible on your income tax return. The tax code allows deductions for only four kinds of taxes:

  • Income taxes paid to state, local or foreign governments.
  • Real estate taxes.
  • Personal property taxes, such as on cars, boats or other property besides real estate.
  • State and local sales taxes.

However, if your hotel stay is for a tax-deductible purpose, then you can include the full cost of the stay, including all taxes, in your deduction. For example, if you are a sole proprietor traveling for business reasons, the full cost of your hotel room would be a deductible business expense.

The same thing applies if you stay in a hotel as part of job-related moving expenses, as long as you meet the other requirements for deducting moving expenses.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Absolute Zero $0 federal (1040EZ/1040A) + $0 state offer only available with TurboTax Federal Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed: File your 2016 TurboTax Self-Employed return between 4/19/17 and 10/16/17 to receive your complimentary subscription to QuickBooks Self-Employed until 10/31/18. Activation by 12/31/17 required. Sign in to QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/turbotax; e-mail address used for activation and sign-in. Offer valid only for new QuickBooks Self-Employed customers. See QuickBooks.com for price comparison.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not purchase TurboTax Self-Employed by 10/15/18, you will have the option of renewing your QuickBooks Self-Employed subscription by 10/31/18 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15%) for tax year 2016. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or on-screen); not included with Federal Free Edition (but available for purchase with the Plus bundle). SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. TurboTax experts provide general advice, customer service and product help; tax advice provided only by credentialed CPAs, enrolled agents and tax attorneys. Feature availability varies by device. State tax advice is free. Service, area of expertise, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access, My Docs and My Analysis & Advice features: Access to all tax-related documents we have on file for you is available until you file your 2017 tax return or through 10/31/2018, whichever comes first. Terms and conditions may vary and are subject to change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com March 13, 2017.
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected in March. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.