This information from one of our local realtors.
Summary: Book before November 1st for as much as a 15% rental increase
UPDATE: Due to the politics of this issue and the elections it looks like the vacation tax might be delayed. You are still encouraged to book your vacations as soon as you can. You never know if they might postdate the taxes effective date. Here is a link to the latest information that we have. HERE
We heard from quite a few of our landlord clients yesterday and today, after we sent around an email talking about the new short term vacation rental tax that is coming to Massachusetts in 2019, and how you might want to factor that into any 2019 rate changes.
Many of you have questions. We’ll answer the ones we can, where there is a clear answer. But understand, there is still a lot up in the air. Literally right now, Governor Baker and the state legislature are negotiating on a several key points, and until they reach agreement, the details and fine print are subject to change. SHORT TERM VACATION RENTAL TAX Q&A
- What is considered a Short Term Vacation Rental? The tax would apply to rentals of 31 days or less.
- Who pays the tax? The new tax will be paid by the rental customer. It becomes a line item fee on a lease, just like the sales or lodging tax would be on a hotel bill. The customer pays it, not the landlord.
- Who collects the tax? If you rent your home thru Point B, we collect the tax as part of our lease process (which will include state, local, and possible regional taxes). We have a very sophisticated new property management system that automates the tax collection and processing for us and for you. If you also rent your home on your own, you will be responsible for collecting and reporting the tax separately.
- When does the new tax begin? The current plan puts the new tax will into effect for 2019. Leases for 2019, signed before November 1, 2018, would not
be subject to the new tax, but all others after that date will be.
Given the current delays in the final negotiations between the governor
and the legislature, Ryan Castle, the CEO of the Cape and Islands Association of Realtors, told us yesterday, it
is unclear if the November 1st timeline will stay in place or not.
However, both sides agree they want the tax in place for 2019. It is
always possible they won’t reach a compromise but it is expected.
- What will the new tax rate be? It
will depend on the final decisions AND it will depend where your
property is located on the Vineyard. Here are some of the variables. The
state rate is already set at 5.7%. Local towns can add up to 6%. And on
the Cape and Islands, there is an additional 2.75% waste water tax. And
there is another “community impact fee” of 3%, that towns could levy on
homeowners, who own two or more short term rental properties. Some of the caveats.
Towns have to opt in for waste water tax, and the 3% tax on owning two
or more rental homes. There is reportedly some push back on these. It’s
also not yet known, what local tax level our island towns would set, but
if we look at the current lodging/rooms tax (that hotels pay),
Edgartown is 4%, Oak Bluffs and Vineyard Haven are 6%, and Chilmark is
4%. Final rates are still to be set.
- Liability Insurance Requirement.
All short term vacation rental homeowners will be required to carry not
less than $1 million of liability coverage for each stay.
- Required Registration With The State. There
will be a required online state registry for all short term vacation
rental homes. There is no statewide inspection requirement but towns may
require licensing and/or inspections, and can set other rules for
Right now, that’s all we know. Bottom
line, rental customers next year on the Vineyard are going to see
substantially higher overall rental costs, which could jump anywhere
from 10% – 15+% more than this year. This is why we have recommended to many of our landlord clients to hold off on big rate increases for now.
course, eventually, it will all even out in the rental equation. Most
other destinations already have similar taxes in place. But it’s that
first year when the big jump comes, that causes the sticker shock.