Taxes, licenses, and other legal requirements can quickly become overwhelming, especially if you’re new to short-term rentals. There is so much to learn. And even after you’ve learned the requirements, they could change. Staying in compliance requires staying up to date as legal obligations change over time.
Know About Tax Requirements
Looking at taxes, it can be a little tricky. There may be a few taxes you need to consider such as self-employment tax, income tax, etc. Remember to also save receipts when you make any purchases involving the rental. For example, if you buy to upgrade the property and for guests to use, save the receipt. These often qualify as deductions at tax time. Keep in mind, you may not need to pay income tax if you rent out for less than two weeks a year. You’ll want to talk with an accountant or property manager to make sure that you’re proceeding correctly and staying in compliance. You also need to remember the importance of the lodging tax. Your guests will pay an occupancy/lodging tax when they book with you. You need to ensure that you’re charging the right amount of tax (check with local government if you’re not working with a property manager). This tax will then need to be remitted to the government.
Look Into Licensing
You’ll also want to consider any licenses that may be required in your local area. Many places will require that you have a business permit or license. It’s important to find out what your area requires. Check out local government websites for further information. When you register as an LLC or corporation, it can also help protect you. There may be rare cases where a guest may try to sue you. Having this registration can help you in these situations. Business insurance can also be beneficial. Another license you may be required to have is a short-term rental license. This will ensure that you’re staying in compliance with any health and safety regulations.
Check Into Zoning Laws
Depending on where you live, there could be a lot of stipulations about what you can and can’t do. Some places will not allow short-term rentals. Others may limit how many rentals are allowed within the vicinity. Some may only allow you to rent for a certain number of days. And keep in mind zoning laws will also dictate how many people can stay in a property at one time. Look into what the zoning laws are in your area. They may also mention where and when you can have a rental. For example, in some locales, you can only have a short-term rental at the place where you live.
Know the Legalities for Special Situations
There are also additional legalities you need to be aware of. For example, if you’re under a lease with someone else but want to rent short-term to a guest, you need to check what your lease allows. Does it allow a sublease? If you’re a part of an HOA, there could be association rules regarding what you can and can’t do when it comes to short-term rentals.
Make Sure You’re Staying in Compliance
As you can see, there are a number of things you need to keep in mind when running a short-term rental. It’s a business that requires a lot of knowledge, planning, and working with experts. Accountants, lawyers, and property managers can help ensure that you stay in compliance. You can check your state and county websites to stay up to date on what the local regulations are. You can also check out the website AllTheRooms. This site will show you information regarding various cities’ “legal requirements, local laws, licensing requirements, short-term rental taxes”, and more.
It can be a lot of information to research and compile on your own. Our recommendation is to work directly with experts from the beginning to help you along the way. A qualified and trusted property manager is an excellent choice. Property management companies, such as us at PMI, are very familiar with laws and taxes that apply to short-term rentals. We have years of experience managing properties in various locations. We also stay up to date on the latest legalities, since they can change over time, ensuring that rentals are always in compliance. Sure you can look at government websites and locate information, but it will take time to gather everything. It will save you time and frustration if you work with a property management company.
Speaking of time, property managers can give you back your life. Short-term rentals can be lucrative but they can also be time-consuming. When you trust PMI to handle the day to day, you can gain access to a truly passive income that allows you to live life the way you want. So, not only will we help you stay in compliance and out of legal trouble, but we will also give you more time to enjoy life (or even make more investments). Learn more by visiting our website today at https://www.propertymanagementinc.com/