Cleaning Fees, Damage Deposits & Taxes: Where Do They Go in Your Books?
This article is general information, not tax or financial advice. Treatment varies by jurisdiction and your circumstances — confirm the specifics with an accountant.
Not all the money in a booking is income
A single booking bundles several kinds of money together, and they do not all belong in the same place in your books. Some of it is revenue. Some of it is a liability you owe back. Some of it is tax you are collecting on someone else's behalf. Treat all of it as income and you overstate your earnings, muddle your tax position, and create headaches every time you refund a deposit.
This guide sorts the three most-confused amounts — cleaning fees, damage deposits and occupancy taxes — into their correct homes, and shows how Airflow records each one properly without you having to think about it each time. It is part of our wider guide to accounting for short-term rentals.
Cleaning fees: income, with a cost to match
A cleaning fee charged to the guest is income. The guest paid it to you, you keep it, and it shows up in your revenue. The only nuance is to record it in its own income account, separate from accommodation, rather than folding it into the nightly rate.
There are two good reasons for the split:
- Tax treatment can differ. In some jurisdictions cleaning is treated differently from accommodation for VAT or sales tax, so you need them on separate lines to apply the right rate.
- You want to see it against your cleaning costs. When cleaning fee income sits in its own account and what you pay cleaners sits in its own expense account, you can tell at a glance whether the fee actually covers the work — or whether you are quietly subsidising turnovers.
So cleaning fees go to a Cleaning Fee Income account, and the money you pay cleaners goes to a Cleaning & Turnover expense account. Two accounts, one clear picture. We cover the full structure in your short-term rental chart of accounts.
Damage deposits: a liability, not revenue
This is the one hosts get wrong most often. A refundable damage deposit is not income. It is the guest's money, held by you, that you owe back unless you make a claim against it. In accounting terms it is a liability while you hold it.
Booking a deposit as income does two unhelpful things. It inflates your revenue with money you will mostly hand back, and it turns every refund into an awkward reversal that distorts the month it falls in. Far cleaner to record the deposit to a Damage Deposits Held liability account when you receive it, and clear it from that account when you refund it.
The treatment changes only if you actually retain some of the deposit — say, to cover damage. At that point the retained amount becomes income (or an offset against the repair cost, depending on how you account for it), and you move just that portion out of the liability account. The unretained balance still goes back to the guest and never touches your revenue.
| Event | Account movement |
|---|---|
| Receive refundable deposit | Increase Damage Deposits Held (liability) |
| Refund deposit in full | Clear it from the liability account |
| Retain part for damage | Move the retained part to income (or against repair cost); refund the rest |
A note worth keeping in mind: some platforms collect or guarantee deposits on your behalf rather than passing the cash to you. In that case there may be no money to hold at all, and the "deposit" is a claims process, not a balance on your books. Check how each platform actually handles it before recording anything.
Occupancy and tourist taxes: money you are passing through
Many cities and regions levy an occupancy, tourist or lodging tax on short stays. Where you collect this from the guest to remit onward to the authority, it is not your income — you are a collection agent for it. It belongs in a liability account (Occupancy Tax Collected) until you pay it over, at which point you clear the account.
The complication is that platforms handle this inconsistently. Some collect and remit the local tax themselves, so it never reaches you and you record nothing. Others pass it through to you and expect you to remit it, so it must sit as a liability until you do. Getting this wrong in either direction causes problems: book pass-through tax as income and you overstate revenue and pay income tax on money you owe the city; ignore tax the platform actually handed you and you may fail to remit it. The safe move is to confirm, per platform and per location, who is responsible — then record accordingly.
VAT and sales tax on your own supply
Separate from occupancy tax is the VAT or sales tax on your own accommodation supply, if you are registered. That flows through its own control account: tax you charge guests is a liability you owe, tax you pay on costs may be reclaimable, and the difference is what you settle with the authority. Short-term holiday accommodation is often standard-rated even where long lets are not, which catches some hosts out as they grow. We cover registration and OTA VAT in VAT for short-term rentals.
How Airflow records each correctly
The reason these amounts get mis-filed is that sorting them by hand on every booking is tedious, so they get lumped together. Airflow keeps them apart by default.
You forward a booking email, or connect Gmail or Outlook so bookings are picked up automatically. Airflow's extractor reads the email and pulls out the guest, dates, nightly rate, cleaning fee, platform service fee, payout, currency and reference. From that it builds a draft invoice in your accounting software with:
- Cleaning fee on its own income line, separate from accommodation
- Accommodation and extras on their own lines, each with the right tax treatment
- The platform commission as an expense, not netted away
- Currency converted at invoice time with the rate, source and timestamp logged
Every invoice lands as a draft you review and approve — nothing posts automatically, so you keep full control over how deposits and pass-through taxes are mapped for your jurisdiction. Because deposits and collected taxes vary so much by location and platform, the review step is where you confirm those land in the right liability accounts. Airflow works with Xero, QuickBooks, Sage and FreshBooks.
Put each amount in its right home
The rule is simple once you see the categories: cleaning fees are income with a matching cost, refundable deposits are liabilities you owe back, and collected taxes are money you are passing through. Keep them separate as you record them, and your revenue stays honest, your refunds stay clean, and your tax position stays clear.
For the wider context, read the complete short-term rental accounting guide, and to see where every one of these lines belongs, build it into your short-term rental chart of accounts. When filing season comes, getting your books ready in a weekend shows how clean records make it painless.
Get started — early access includes 3 months free. Connect your accounting software, forward a booking email, and review how each amount is recorded. A card is required at checkout, with no charge during the free period.