How the Proposed Fire Tax Benefits Short-Term Rental Owners at the Expense of Residents
September 14, 2025
A proposed Fire Tax, supported by 3 of the 5 Melbourne Beach Town Commissioners, disproportionately benefits short-term rental (STR) owners, such as those operating Airbnb or VRBO properties, while placing a heavier financial burden on residents. STR owners can deduct the tax as a business expense, reducing their taxable income, whereas residents who don’t operate rentals bear the full cost without tax relief.
Background
The IRS classifies short-term rentals, like Airbnb, as businesses, allowing owners to deduct many operating expenses. However, Melbourne Beach’s Land Development Code prohibits vacation rentals in residential Zones 1RS, 2RS, and 3RS Despite this, the majority of current Town Commissioners have taken no action to enforce these regulations, permitting STRs to proliferate in residential areas, much to the frustration of local residents.
Tax Advantages for Short-Term Rental Owners
The IRS allows STR owners—whether individuals or LLCs—to deduct a wide range of expenses, giving them significant tax advantages unavailable to residents who don’t operate rentals. These deductions include:
• Mortgage Interest and Property Taxes: Deductible for STR owners, unlike residents’ personal home expenses.
• Utilities: Costs for electricity, gas, water, and internet are deductible.
• Maintenance and Repairs: Expenses for cleaning, landscaping, and repairs can be deducted.
• Supplies and Furnishings: Items like towels, linens, cleaning supplies, furniture, and appliances are deductible or depreciable.
• Depreciation: STR owners can recover the cost of purchasing the property and improvements over time, a major deduction unavailable to residents.
• Travel Expenses: Travel to and from the rental property, including mileage, airfare, meals, lodging, and entertainment, is deductible. For example, an owner from Colorado can deduct a trip to Melbourne Beach, even if it includes a stay at a luxury hotel or attending a Miami Dolphins game.
• Losses and Income Offsets: If deductions exceed rental income, resulting in a “paper loss” (e.g., from depreciation), STR owners can use this loss to offset other personal income, such as a salary. For instance, a $100,000 salary could be reduced to $80,000 for tax purposes if an STR shows a $20,000 loss, further lowering tax liability. Residents without STRs cannot claim such offsets.
Additionally, STR tenants often pay down the property’s mortgage, increasing the owner’s equity, while owners claim further deductions available to individuals.
The Fire Tax and Its Unequal Impact
The proposed Fire Tax, along with other local taxes and fees, can be deducted by STR owners as a business expense, lowering their taxable income. STR owners can also pass the cost of the tax to tenants by raising rental rates, effectively offsetting the tax’s impact. In contrast, residents who don’t operate STRs must pay the full tax without deductions, bearing the entire financial burden.
This tax exacerbates the challenges for residents living in a community increasingly dominated by vacation rentals, a situation enabled by the majority of Town Commissioners. The unchecked growth of STRs disrupts residential neighborhoods, creating additional inconveniences for taxpaying residents.
Candidates Opposing the Fire Tax
Only two candidates running for Town Commissioner, oppose the proposed Fire Tax, advocating for policies that prioritize residents’ interests.