Back in 2019, we made you aware of a new tax rule in Massachusetts that expanded the state’s hotel and motel tax to include the short-term rental of homes and condos. A short-term rental is defined as any rental period of 31 days or less and that are subject to a 5.7% state tax as well as any location-based local taxes and/or town assessments.
EXAMPLE
For example, if you own a home on Cape Cod that you rent during the year, you must do two things:
-
Operators of short-term rentals must register with MassTaxConnect. Certain towns may also require a separate registration/fee.
-
Taxes are due to the state via MassTaxConnect by the 30th of the month after the renter(s) depart. For example, if you have 2 rental parties who depart in July, their taxes will be due by August 30th. Payments are made electronically on the MassTaxConnect website. Please note that if you utilize a rental service such as VRBO or Airbnb, they may be paying the tax for you but you will want to confirm as it is the responsibility of the operator to ensure timely payments. However, if you rent your residence independently, you are responsible for remitting the tax.
EXCLUSIONS
If you rent your home for 14 days or fewer per calendar year, you are exempt from the tax but are still required to register your home and provide insurance (minimum of $1M in liability insurance). Additionally, long-term rentals defined as longer than 31 days are excluded from the tax.
TAXABLE ITEMS
Taxable items include the rent and any other non-refundable charges such as cleaning, linen or pet fees. The tax imposed is meant to be paid by the renters, just like they would pay the tax at a hotel or motel. Additional taxes such as wastewater tax (applicable to 15 towns in Barnstable County) and individual town assessments should be included in the taxes charged to renters. For a full list of Massachusetts towns and the tax percentage they are each assessing, click here.
In summary, while this rule is not new, we wanted to remind our clients and friends of the firm of this rule as we approach year-end so you are prepared to file your taxes for calendar year 2023. As always, we are here to help if you have any questions. Please call our office at (781) 551-0040 to speak with us about your individual situation. And, be sure to follow us on Facebook and LinkedIn to stay up-to-date on important information for businesses and individuals as it becomes available.
