Alabama Short-Term Rental Tax Overview
Alabama imposes state income tax at rates up to 5.0% on net rental income, combined with Lodging Tax at 5% on gross rental receipts. State lodging tax of 5% applies to all transient accommodations under 180 days. The total tax burden for Airbnb hosts in Alabama varies by location, ranging from approximately 10% in Birmingham to 6% in Huntsville. Understanding the layered structure of federal, state, and local taxes is essential for compliance and accurate pricing.
This guide covers the 2026 tax year. Tax rates and rules change frequently — always verify current rates with the Alabama Department of Revenue and consult a qualified tax professional for advice specific to your situation. Federal tax obligations (Schedule E, Form 1099-K, the 14-day rule) apply in addition to all state and local taxes described below. See IRS Publication 527 for federal rental income rules.
Income Tax on Rental Income
Rate: 5.0%
Graduated rates from 2% to 5%; rental income reported on Alabama Form 40
- Net STR income (after expenses) reported on the Alabama state income tax return
- Federal Schedule E (or Schedule C if substantial services provided) is required regardless of state tax
- The 14-day rule: if you rent your primary residence 14 days or fewer per year, federal rental income is tax-free (IRS Publication 527)
- Self-employment tax may apply if you provide hotel-like services (daily cleaning, meals, concierge)
Lodging Tax
Rate: 5%
State lodging tax of 5% applies to all transient accommodations under 180 days
What Airbnb Collects Automatically
- State lodging tax (5%) in most jurisdictions
What Hosts Must Collect and Remit
- County lodging taxes (1-6% depending on county)
- City lodging taxes where applicable
- Local tourism taxes in some municipalities
Local Tax Rates by City in Alabama
Combined estimated occupancy/lodging tax rates including state + local components (income tax not included):
| City / Area | Local Tax Rate | Combined Rate | Registration Required? |
|---|---|---|---|
| Birmingham | 3% city + 2% county | 10% | Yes |
| Gulf Shores | 5% city + 3% county | 13% | Yes |
| Orange Beach | 5% city + 3% county | 13% | Yes |
| Mobile | 1.5% city + 1% county | 7.5% | Yes |
| Montgomery | 2% city | 7% | Yes |
| Huntsville | 1% city | 6% | Yes |
Deductions for Alabama Airbnb Hosts
Alabama generally conforms to federal depreciation rules under IRC Section 168. However, Alabama does not conform to bonus depreciation under Section 168(k) — hosts must use standard MACRS depreciation (27.5 years for residential rental property). Alabama allows a federal income tax deduction on the state return, which partially offsets the state tax burden for rental income.
Common Deductible Expenses
- Depreciation — Building cost over 27.5 years (IRS Publication 946); often the largest single deduction
- Mortgage interest — Deductible in proportion to rental use percentage
- Property taxes — Proportional to rental use days vs. personal use days
- Insurance — STR-specific or landlord insurance premiums
- Cleaning and maintenance — All turnover cleaning fees, repairs, and upkeep
- Supplies — Linens, toiletries, coffee, kitchen supplies for guests
- Platform fees — Airbnb host service fees (typically 3%) are fully deductible
- Utilities — Electricity, internet, water, gas proportional to rental use
- Professional fees — CPA, tax preparer, attorney fees related to the rental business
Filing Requirements and Deadlines
Registration
Required: Transient Occupancy Tax License
Cost: Varies by county; typically free to $50
Register at: Alabama Department of Revenue
Filing Schedule
Monthly for lodging tax; annually for income tax (April 15)
Key Resources
Common Alabama Tax Mistakes for Airbnb Hosts
Mistake #1
Forgetting county-level lodging taxes — Airbnb collects state tax but many Alabama counties impose separate taxes that hosts must register for and remit independently.
Mistake #2
Not claiming the federal tax deduction on the Alabama return — Alabama is one of few states that lets you deduct federal taxes paid, which reduces your state taxable rental income.
Mistake #3
Operating in Gulf Shores or Orange Beach without a business license — these beach communities enforce STR licensing strictly and fine unlicensed operators up to $500 per violation.
Alabama Short-Term Rental Regulations Beyond Tax
Alabama does not have a statewide STR regulation framework; rules are set at the municipal level. Gulf Shores and Orange Beach have the most stringent requirements, including mandatory registration, safety inspections, and occupancy limits. Birmingham introduced STR regulations in 2023 requiring a business license and compliance with zoning ordinances. Many rural Alabama counties have minimal or no STR-specific regulations.
Calculate Your Alabama Airbnb Tax
Enter your income, expenses, and select Alabama to get an instant federal + state estimate.
Frequently Asked Questions
Does Alabama tax Airbnb income?
Yes. Alabama imposes both state income tax (2-5% graduated rates) and a 5% state lodging tax on short-term rental income. Additionally, most counties and many cities impose their own lodging taxes ranging from 1% to 6%. Airbnb collects the state-level 5% lodging tax automatically in most jurisdictions, but hosts are responsible for county and city taxes. All net rental income must also be reported on your Alabama Form 40 state income tax return. See IRS Publication 527 and Alabama Department of Revenue guidance for details.
Does Airbnb collect Alabama lodging tax automatically?
Airbnb collects and remits the 5% state lodging tax in most Alabama jurisdictions through its Voluntary Collection Agreement with the state. However, Airbnb does NOT collect county or city lodging taxes in most cases. Hosts in Birmingham, Gulf Shores, Orange Beach, Mobile, and other municipalities must register separately with their local tax authority and remit local taxes themselves. Always verify your specific jurisdiction on Airbnb's "What We Collect and Remit" page.
Do I need a permit to run an Airbnb in Alabama?
Requirements vary by city and county. Gulf Shores and Orange Beach require STR business licenses, safety inspections, and compliance with local ordinances. Birmingham requires a business license. Many smaller cities and rural areas have no specific STR permit requirements, though you may still need a general business license from your county. Check with your local municipality before listing.
Can I deduct Airbnb expenses on my Alabama tax return?
Yes. Alabama generally follows federal rules for rental expense deductions, including mortgage interest, property taxes (proportional to rental use), insurance, cleaning, supplies, repairs, utilities, and depreciation. The key difference from federal rules is that Alabama does not allow bonus depreciation — you must use standard 27.5-year MACRS depreciation. Importantly, Alabama also allows you to deduct your federal income tax paid, which reduces your state taxable income. See IRS Publication 527 for eligible deductions.
When do I file Alabama lodging tax returns?
Alabama lodging tax returns are filed monthly, due by the 20th of the following month. For example, January lodging tax is due by February 20. If your average monthly tax liability is under $200, you may be eligible for quarterly filing instead. State income tax returns are due April 15 annually (Form 40). File lodging tax returns through the Alabama Department of Revenue's My Alabama Taxes online portal at myalabamataxes.alabama.gov.