Vacation Rental vs Long-Term Calculator

STR vs LTR Economics: What Really Differs

A long-term rental (LTR) is a lease of a month or longer, usually a year, to one household that pays its own utilities. A short-term rental (STR) is a series of stays measured in nights, booked through platforms or directly. The same house produces two very different income statements:

• Revenue: STR revenue is nightly rate times nights booked, plus cleaning fees. LTR revenue is monthly rent times months occupied. STR revenue is higher in good markets and far more volatile.
• Variable costs: STR cleaning, laundry, restocking and platform fees scale with every booking. LTR has almost none.
• Management: full-service STR management commonly charges a much larger percentage of revenue than LTR management, because it includes guest messaging, pricing and turnover coordination. Self-managing an STR is a part-time job.
• Fixed costs: the STR owner pays utilities, internet, streaming and furnishings. Insurance designed for short-term rental use can cost more than a standard landlord policy.
• Wear and capital: more guests mean more wear. The calculator raises maintenance by 25% for the STR scenario; furniture, linens and small appliances also need regular replacement.
• Risk: STR income depends on demand, reviews, seasonality and regulation that can change. LTR income depends mainly on one tenant paying on time.

Time is a real cost that rarely appears on the spreadsheet. If you self-manage an STR, estimate your hours per month and decide what they are worth before you compare net income.

Occupancy, ADR and RevPAR: The Three STR Numbers

The hospitality industry measures short-term rental performance with three linked figures:

• Occupancy = nights booked ÷ nights available. 237 nights booked out of 365 is 65%.
• ADR (average daily rate) = room revenue ÷ nights booked. If 237 nights earn $52,140, ADR is $220.
• RevPAR (revenue per available night) = room revenue ÷ nights available, or ADR × occupancy. $220 × 65% = $143.

RevPAR matters because occupancy and rate trade off against each other. Dropping your rate to $180 might lift occupancy to 75%, which gives a RevPAR of $135, lower than before even though the calendar looks fuller, and with more turnovers to pay for. Raising the rate to $250 at 55% occupancy gives a RevPAR of about $138 with fewer cleanings. Compare strategies on RevPAR and on net income, not on occupancy alone.

When you set the calculator’s nightly rate, use a realistic year-round ADR, not peak-season pricing. Look at how comparable listings price across the calendar, including weekdays and the off season, and remember that long stays at discounted rates pull the average down.

Local STR Regulation: Permits, Limits and Taxes

Regulation is often the deciding factor, and it is local. Before you buy or convert a property, check each of these with the city or county where it sits:

• Zoning and permits. Many jurisdictions require a short-term rental permit or registration number, may restrict STRs to certain zones, or allow them only in a host’s primary residence.
• Caps and limits. Some places cap the number of nights per year, the number of permits, or occupancy per bedroom, and require safety inspections, parking or a local contact.
• HOA and condo rules. Association covenants can prohibit or restrict rentals under a minimum term, regardless of what the city allows.
• Lodging and occupancy taxes. Stays below a threshold length are often subject to state or local sales, lodging, hotel or transient occupancy taxes. You may need to register, collect and file returns. Platforms collect and remit some taxes in some places and not others, so confirm which ones remain your responsibility.
• Business licenses and insurance. A local business license and STR-specific insurance may be required. A standard landlord policy may exclude short-term guests.
• Lease and mortgage terms. Check whether your loan documents or insurance restrict short-term rental use.

Rules change, sometimes quickly, and enforcement can include fines and permit revocation. If a deal only works as an STR, the regulatory risk belongs in your downside case: run the calculator again with the long-term numbers and make sure you could live with them.

How the IRS Treats STRs Differently from LTRs

Three federal rules most often change the tax picture. They interact, so treat this as orientation and confirm your facts with a CPA.

The 7-day average stay rule

A long-term rental is a “rental activity” and its losses are passive regardless of how much you participate, subject to exceptions such as the $25,000 special allowance for owners who actively participate (phased out as modified adjusted gross income rises from $100,000 to $150,000, per IRS Publication 925) and the real estate professional rules. But under Treas. Reg. § 1.469-1T(e)(3)(ii)(A), an activity is not a rental activity if the average period of customer use is seven days or less (and under (ii)(B), 30 days or less if significant personal services are provided). IRS Publication 925 describes the average as the total number of days in all rental periods divided by the number of rentals during the year.

When an STR falls outside the rental-activity definition, it is tested like a business. Its losses are passive unless you materially participate under one of the seven tests in Treas. Reg. § 1.469-5T(a), such as participating more than 500 hours in the year, or more than 100 hours and not less than any other individual, including your cleaners and manager. An owner who materially participates may be able to use losses against other income; an owner who does not cannot, and the $25,000 allowance for rental real estate generally does not help because the activity is not a rental activity.

The 14-day / 10% personal-use rule

Under IRC § 280A(d)(1), you use a dwelling unit as a residence if your personal use exceeds the greater of 14 days or 10% of the days it is rented at a fair rental price. Personal use includes days used by you, a co-owner, or a family member, days used under a swap arrangement, and days rented below fair rent (§ 280A(d)(2)); IRS Publication 527 adds that a day spent working substantially full time on repairs and maintenance is not a personal-use day. The consequences:

• Used as a residence and rented fewer than 15 days: the rental income is excluded from gross income and no rental deductions are allowed (§ 280A(g)).
• Used as a residence and rented 15 days or more: report all rental income, divide expenses between rental and personal days, and the rental deductions cannot create a loss; excess expenses carry forward (IRS Publication 527, chapter 5).
• Not used as a residence: expenses are still divided between rental and any personal days, but the § 280A limit does not apply and the normal passive activity rules do.

Schedule E vs Schedule C

IRS Publication 527 says rental income is reported on Schedule C, not Schedule E, if you provide substantial services primarily for your tenant’s convenience, such as regular cleaning, changing linen or maid service. Schedule C income can be subject to self-employment tax. Turnover cleaning between guests is not necessarily the same thing, so the answer depends on the services you provide.

Depreciation is another area to raise with your preparer. Residential rental property is depreciated over 27.5 years (IRS Publication 527), but the definition of residential rental property excludes units used on a transient basis in some circumstances, and some advisors depreciate short-term rentals over a longer recovery period. Do not assume either answer without professional advice. The tax strategy guide and tax deduction checklist cover the general rental rules.

A Worked Comparison: the Same House Both Ways

Example (hypothetical): a $350,000 three-bedroom near a lake town. Shared assumptions: property tax of $4,200 a year, insurance of $2,400 a year, maintenance budget of 1% of value, and no mortgage (so we compare NOI). Short-term inputs are the calculator’s defaults with a $220 nightly rate.

Gross income is 2.8 times higher as a vacation rental, but NOI is only about $6,560 a year higher, and that margin pays for far more work, risk and regulation. The calculator’s break-even occupancy is 29% ($23,100 ÷ ($220 × 365)), the point where nightly revenue matches the lease’s gross rent. The occupancy where STR NOI matches LTR NOI is about 53%. At 50% occupancy the STR nets about $9,290, less than the long-term lease.

Management is the biggest swing factor. If the owner self-manages instead of paying 25%, STR NOI rises to about $33,250, but the owner is now running a hospitality business. Price those hours honestly.

Then apply the tax rules. With a three-night average stay, this STR is under the seven-day threshold and is not a rental activity for the passive loss rules. If the owner’s family also uses the house for 20 nights while it rents for 237, personal use (20 days) is below the greater of 14 days or 10% of rental days (23.7), so § 280A does not treat it as a residence, but expenses must still be split between the rental and personal days. At 30 family nights it would cross that line. Small calendar decisions change the tax result.

Common Mistakes When Comparing STR and LTR

• Using peak-season rates as the annual ADR. Build the year from the calendar, including slow months.
• Assuming year-one occupancy matches established listings. New listings need reviews.
• Skipping the permit and tax research. A prohibited or capped STR is an LTR with furniture.
• Ignoring the owner’s time. Self-management makes the numbers look better by moving cost onto you.
• Counting family stays without tracking them. Personal days drive § 280A. Keep a calendar log.
• Forgetting furnishings in the cash invested. Furniture, linens and setup costs are part of your capital and wear out.

Thinking About Selling or Converting Later

Owners often switch strategies when regulation tightens or burnout sets in, and some decide to sell. If you are weighing whether to keep, convert or sell a vacation property, compare the options after tax with the keep-or-sell rental property calculator. For more background, see the vacation rental vs long-term guide, the seasonal rental property guide, the break-even calculator and the ROI calculator.

General information, not legal or tax advice. Examples are hypothetical. Federal tax rules described here reflect IRS sources reviewed in October 2026 and can change; state and local rules and taxes vary. Consult a CPA and a local attorney before relying on any of this for a decision.