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Massachusetts Tax on Short Term Vacation Rentals

Airbnb, HomeAway, and similar websites allow Massachusetts homeowners to rent their properties in the short-term vacation rental market. These sites are particularly popular in communities along the seacoast where the demand for vacation rentals is high. Currently, these types of rentals are not subject to a specific tax, although this may soon change with Bill H.3454.

Details on the Proposed Massachusetts Tax on Short Term Vacation Rentals

The proposed tax would include an excise tax of between 5% and 10% on short term vacation rentals in Massachusetts. The tax rate will depend on whether the property owner is renting out his/her own principal residence, whether the property is professionally managed, and whether the owner is a commercial entity. Tax rates would be lower for private hosts offering their own residence for rent versus a commercial host.

Additionally, the bill would give cities and towns the ability to regulate such rentals. They could prohibit certain types of rentals, limit the number of consecutive or total days that a property may be rented, mandate licensing, require liability insurance, and more. Failure to comply with regulations would result in a fine of up to $1,000 per day that a property is rented while in violation of set regulations.

Why the Changes

The reason for the proposed taxation is pretty clear. The number of such short terms rentals in the state of Massachusetts is quite significant. AirBNB, for example, reports approximately 592,000 such rentals in the state last year. Taxing these rentals would provide significant income for the state.

The ability for cities and towns to regulate such rentals is aimed primarily at safety. Perform a quick online search and you can easily find horror stories from both property owners and renters. Common sense regulations can help minimize some of those situations and provide some added protections to all involved.

Who Will Pay the Tax?

So, now here’s the big question… who will pay the Massachusetts tax on short term vacation rentals? Just like sales taxes, consumers (or in this case, renters) will pay the tax. Will it impact the demand for short term vacation rentals in Massachusetts? It’s unlikely,…at least that’s the hope!

If you own a property that you offer for rent, you may want to stay up-to-date on the progress of this bill. A similar bill failed to pass last year, although that’s not to say that it won’t go through this year. Should the bill pass, be sure to find out exactly what your city/town requires and comply with those regulations to avoid hefty fines.

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Attorney John J. Martino offers a broad range of legal services in Eastern MA and Southern NH. As a highly dedicated and experienced professional, he handles cases under the following areas of practice:

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