Iowa vacation rental tax guide

With a bounty of popular destinations including Des Moines, Cedar Rapids, and Sioux City, the Hawkeye State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STR stays in Iowa are subject to tax. Failure to comply with state and local tax laws can result in fines and penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you. 

Avalara MyLodgeTax put together this guide to help you comply with Iowa lodging tax laws at the state level. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

No lodging tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your STR questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Iowa tax laws.

Lodging taxes are calculated as a percentage of the cost of your guest’s stay and added to the price on the bill. The guest pays the tax, but the STR operator is responsible for collecting and paying it to the proper tax authority.

What’s the definition of “short-term rental” in Iowa?

Reservations of 90 consecutive days or less are subject to Iowa lodging taxes.

Who’s required to collect and file lodging taxes on short-term rentals in Iowa?

If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling, you’re likely responsible for collecting, filing, and remitting lodging taxes to Iowa tax authorities. 

Location is key to compliance

The location of your rental is a crucial piece of information for lodging tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.

Use our lodging tax lookup tool to get a rate report specific to your Iowa rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.

It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.

Local short-term rental regulations

STR operators in Iowa should be aware of the local regulations that apply to them, including rules covering:

• Legality

• Permits, licenses, and registration

• Zoning

• Advertising

• Neighborhood notification

• Building and housing standards

Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of STR policies that apply to your property.

Before you can begin collecting taxes on your STR in Iowa, you’re legally required to register with the Iowa Department of Revenue. You can register online to receive a tax permit. If all your transactions go through an STR marketplace that is collecting taxes for you, you’re not required to register with the state or collect state lodging taxes.

Once you’ve registered with tax authorities, you’re ready to start collecting lodging taxes, which you’ll add to your guest’s bill when they pay for their stay.

Which lodging taxes apply to Iowa short-term rentals?

In Iowa, STRs are subject to state and local hotel and motel tax.

Tax rates

Before you can begin collecting lodging taxes, you need to know the correct rate to charge to avoid compliance issues. Our lodging tax lookup tool can give you a rate report specific to your Iowa address.

What charges are taxable?

In Iowa, all charges related to the rental of accommodations are subject to hotel and motel tax. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. 

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects lodging taxes for me? 

In Iowa, STR marketplaces such as Airbnb and Vrbo are required to collect lodging taxes for operators when the listing is booked. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities.

Are guests ever exempt from lodging taxes?

There are situations in which you aren’t required to collect lodging taxes in Iowa. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes.

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Iowa Department of Revenue. In Iowa, you can file returns and pay the tax amount due online. The Iowa Department of Revenue allows credit card payments, but you may be charged convenience fees for this type of payment.

When do I need to file my returns?

You’ll be assigned a filing frequency and due dates when you register with the Iowa Department of Revenue. Due dates for hotel and motel tax are as follows:

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the Iowa Department of Revenue?

Yes. STR operators registered with the Iowa Department of Revenue are required to file returns each assigned filing period, regardless of whether you had any STR income or collected lodging taxes. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.

Are there penalties for filing taxes late?

Whether you choose to offer STRs through a marketplace like Airbnb or Vrbo, or directly to guests, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses out of compliance with tax laws. Failure to register with tax authorities and file STR tax returns in Iowa on time may result in late fees, interest payments, and in extreme cases, legal action.

I’ve been offering short-term rentals without collecting lodging tax. What options do I have?

If you’re already operating an STR but not collecting lodging taxes, you may be in violation of Iowa tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.

STR operators in Iowa may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for operators to proactively disclose prior period tax liabilities in accordance with a binding agreement with the Iowa Department of Revenue. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.

Are there options for outsourcing lodging tax filing?

Yes. Many STR hosts in Iowa file several lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.