I own a vacation rental property that is rented as a whole-house for 365 days per year.
I've read advice on the TurboTax forums, including from CPAs, that says local lodging taxes paid out of gross income (as reported by booking platforms) should be recorded on line 16 of the schedule E. There are at least a couple of folks who have written in support of this, but I have a concern.
Mortgage underwriters add back line 16 (along with other costs like depreciation) to a property's income when calculating net income for an investment. The PITI payment is then deducted from the resulting revenue. It appears they add line 16 back to the income so that property taxes aren't deducted twice in the calculation of net revenue (on line 16 and again when they deduct the PITI payment).
Obviously, it's advantageous on a mortgage qualification if lodging taxes can legitimately be included in line 16 (which is simply labeled "taxes"), but in my case, I have enough combined lodging + property taxes to offset my entire mortgage payment. That doesn't feel right, and yet it seems to be the way most people have advised past posters to handle lodging taxes. So, I'd like to know if local lodging taxes can legitimately be included on line 16 given that lenders appear to treat line 16 as applying primarily to property taxes. IRS instructions seem to be silent on this question.
Thanks in advance for the guidance.
