Having a vacation home can put an owner’s mind at ease. A second home or condo can offer a quick change of scenery, a step away from the hustle and bustle of everyday life. Also, the advent of online hosting platforms like Airbnb allows vacation homeowners to maximize property use while still having the leeway to use the property themselves.
Massachusetts defines short-term rentals as owner-occupied, tenant-occupied or non-owner-occupied properties rented out for periods of less than 31 consecutive days.
If you’re considering turning your vacation home into a short-term rental, Massachusetts has regulations specific to this type of lodging that you should familiarize yourself with.
Factors to consider
Before you decide to become an operator or a person running a short-term rental, you must ensure you’re ready to meet all requirements and payments necessary for the business. Operating a short-term rental isn’t the same as letting a friend borrow your home for a night or two.
Factors to consider in turning your home or condo into a short-term rental include:
- Registration: Operators must register their properties with the Massachusetts Department of Revenue using the MassTaxConnect platform. Also, check if your city or town has separate registration and licensing rules. Apart from providing details about the property compliant with zoning laws, you must also provide proof of your tax returns.
- Taxes: Operators must collect a 5.7% state lodging tax and local tax that can reach up to 6% from renters. Check if your property is subject to the 2.75% Water Protection Fund excise tax. Also, a 3% community tax may apply if you own multiple rentals in the same town.
- Insurance: Operators must maintain liability insurance of at least $1,000,000 for each short-term rental. The hosting platform, like Airbnb, can provide this insurance.
- Notice to the insurer: Operators must notify insurers of their intent to use the property as a short-term rental.
- Exemptions: If you’re only renting out your property for no more than 14 days in a calendar year, you can file for an exemption from some requirements. However, you must still register and maintain liability insurance.
Opening a short-term rental can allow you to realize your property’s true potential while lowering the risks of tenant disputes and property wear and tear. Rental income can boost your savings and provide more financial security for your family. Ensure you reap the benefits of your second home by diligently following real estate requirements and regulations.