Learn essential tax reporting requirements for Denver short-term rental owners. Maximize deductions while staying compliant with local and federal regulations.
_______________________________

Rental Income Tax Reporting: Requirements and Strategies for Denver Owners

Understanding Your Tax Obligations as a Denver Rental Property Owner

As a short-term rental property owner in Denver, navigating tax requirements doesn’t have to be overwhelming. Whether you’re managing a mountain getaway in Evergreen or an urban condo downtown, proper tax reporting is essential to your rental business success. The Denver market offers lucrative opportunities, but with them come specific tax responsibilities at local, state, and federal levels. This guide walks you through the essentials of rental income tax reporting while highlighting strategies to help you stay compliant and potentially reduce your tax burden.

Denver-Specific Rental Tax Requirements

Denver property owners face unique tax considerations that differ from other markets. Understanding these local requirements is the first step toward compliance.

Lodger’s Tax and Business Licensing

Denver requires short-term rental operators to collect and remit a 10.75% Lodger’s Tax on rental income. This consists of the standard 8.81% Lodger’s Tax plus a 1.75% Denver Tourism Improvement District assessment and an additional 0.19% fee.

You must also obtain a short-term rental license through the city, which requires an annual fee. This license must be renewed yearly, and the associated fee is tax-deductible as a business expense. Property owners must display their license number on all listing platforms—a requirement that’s strictly enforced and carries penalties for non-compliance.

Colorado State Tax Considerations

Beyond city requirements, Colorado imposes a 2.9% state sales tax on short-term rentals. Depending on your property’s exact location, you may also need to collect and remit Regional Transportation District (RTD) and Scientific and Cultural Facilities District (SCFD) taxes. These combined taxes can add another 1.1% to your tax collection responsibilities.

Colorado requires quarterly filing for most rental property owners, though requirements may vary based on your rental volume. The state provides an online filing system that helps streamline this process.

Federal Tax Reporting for Rental Income

Schedule E vs. Schedule C

At the federal level, most Denver rental property owners report their income on Schedule E (Supplemental Income and Loss) if they provide minimal services to guests. However, if you offer substantial services beyond basic accommodations—such as daily cleaning, breakfast, or airport shuttles—the IRS may classify your activity as a business requiring Schedule C filing instead.

This distinction matters significantly because Schedule C income is subject to self-employment tax (an additional 15.3%), while Schedule E income is not. Working with a tax professional familiar with short-term rental classifications can help ensure you’re filing correctly while minimizing tax exposure.

Documentation and Record-Keeping

Maintaining detailed records is crucial for rental property tax reporting. Keep separate accounts for your rental business and track all income and expenses meticulously. Digital platforms that integrate with your booking systems can simplify this process substantially.

Save receipts for all expenses, maintain a log of when your property was available for rent versus personal use, and document all maintenance and improvement costs. This documentation not only supports your tax deductions but also provides protection in case of an audit.

Tax Deduction Strategies for Denver Property Owners

Denver’s competitive rental market makes maximizing legitimate deductions especially important for maintaining profitability.

Common Deductible Expenses

As a Denver property owner, you can typically deduct:

• Property management fees (including our 20% commission)
• Cleaning and maintenance costs
• Utilities and internet service
• Property insurance
• Mortgage interest
• Property taxes
• Depreciation of the property and furnishings
• Marketing expenses
• Supplies for guests
• Travel expenses related to property management

Denver-Specific Deduction Opportunities

Denver’s climate and market create unique deductible opportunities. Snow removal services, enhanced heating systems, cooling solutions for summer visitors, and altitude-friendly amenities are all potentially deductible expenses that directly relate to maintaining a competitive rental in Denver’s specific environment.

Additionally, improvements that increase energy efficiency may qualify for special tax incentives at both the state and federal levels. Colorado offers various renewable energy tax benefits that Denver property owners should explore.

Get Expert Help with Your Rental Tax Strategy

Don’t navigate Denver’s rental tax landscape alone. Our team at SimplifyRenting understands the local short-term rental market and can connect you with tax professionals who specialize in rental property reporting. We help property owners maximize their rental income while ensuring all tax obligations are met properly.

Ready for stress-free rental property management that includes guidance on tax optimization? Contact us today for a FREE rental analysis and discover how we can help you maximize your Denver property’s earning potential while staying tax-compliant.