While it sounds pretty straightforward, short-term rental regulations can differ quite significantly from one jurisdiction to the next. Where one city might have only one or two rules at most, hosts in other cities not only have to apply for multiple licenses for their vacation homes and guest houses, but they might also have to limit the number of nights that may be rented out.
Vacation rental hosts can earn an incredible income from their short-term rentals. Even more so as the vacation rental market is trending upward. However, they need to comply with their region’s legislation and their city ordinance to ensure that they do not face unpleasant consequences, such as fines or even business closure.
To help you make sense of the regulations, we will be answering some of the most frequently asked questions in this article. From licenses to legislation in the major US cities, here is what vacation property owners need to know to avoid problems and get their vacation rental management right from the start.
Short-term rentals are often used as vacation homes or might be considered by people looking for short business stays or relocation solutions. However, short-term rentals are not just rental properties that are made available for a short period of time. Vacation rental owners also need to consider aspects such as property structure, duration of stay as well as residency, as there might be some restrictions in their areas.
In some cities, a stay of fewer than 30 days can qualify as a short-term rental, while others would require a stay of at least seven days. Some short-term rental legislation can also require a vacation rental to have a primary or permanent resident on site.
Minimal rental use is another big consideration for tax purposes. For instance, according to the IRS, if you rent out a residence for fewer than 15 days, you do not have to report any rental income and may not deduct any rental expenses.
Short-term rental hosts need to be aware that some restrictions might apply to the rental properties they have in mind to operate. Let’s take a look at some of the main points that you need to keep in mind:
Vacation rental owners need to be aware that some cities do not allow any short-term rentals at all. Others might only allow short-term rentals according to certain zones, or only for just a portion of the calendar year.
Here are some cities where short-term rentals are prohibited or restricted:
Calabasas Municipal Code section 17.12.175 dictates that any short-term or vacation rentals of single-family homes or other properties with stays less than 30 days are banned.
Senate Bill S6340A clearly states that renting an apartment or home for fewer than 30 days is against the law. However, rental property owners who rent out rooms or parts of a home for 30 days or less need to be present on site.
In San Francisco, a property owner may rent out an unhosted short-term dwelling unit, provided that the rental period does not exceed 90 days per year. However, should the host live in San Francisco for fewer than 275 days, renewed annually, he or she may not rent out properties for short periods.
Property owners need to take into account that Honolulu does not permit listing a dwelling unit for fewer than 30 days. If an owner has a bed and breakfast, they need to be on-site during occupancy, and non-resort short-term rentals are not allowed unless the owner has a certificate from the local government.
Short-term rentals are not allowed in the French Quarter and the Garden District. Property owners based in the City of New Orleans need to be aware that short-term rentals are restricted to owner-occupied homes. Owners are furthermore required to register for and obtain short-term rental permits in order to operate their properties.
These permits include:
According to Vrolio, short-term rentals in Las Vegas are lightly regulated. Hosts with rentals in this area need a business license to operate the vacation home legally. Short-term rentals are also not allowed for events such as weddings and birthday parties. Short-term rentals here are seen as dwelling units meant for “sleeping”, and must also be owner-occupied.
Over and above the restrictions mentioned, vacation rental laws can also include restrictions regarding the number of short-term rentals allowed per zone. It is best to consult with the specific jurisdiction for your area, as you can face severe fines and penalties if you do not comply with zoning requirements, especially if it is not your first violation.
Often, tourist destinations have stricter limits on short-term rentals too. So, if your vacation rental is located in such an area, ensure that everything is above board.
Areas such as New York have very strict policies when it comes to multiple dwelling units. As mentioned, rentals of 30 days or less are permitted — specifically in buildings that accommodate more than three families (staying on their own) and if a permanent resident is on site. Failure to comply with these laws can incur penalties of up to $2,500 per day.
So, double-check that you are up to date with the latest news about local law. Otherwise, you could face huge losses if you have invested hard-earned dollars in setting up your short-term dwelling unit.
Depending on where you are located, you might also have to obtain a short-term rental license. In brief, these licenses include:
When you have a vacation rental that falls under operating a business, your city or county in all likelihood requires you to have a license or permit.
Property owners with short-term rentals will also need short-term rental licenses or permits. You will need to apply to prove that your vacation rental meets health and safety requirements as specified in law and that it complies with the zoning regulations in your county.
Bear in mind that you might need to provide proof of whether your rental property will be used as a primary or secondary residential unit.
Property owners need to pay close attention to short-term rental legislation and regulations in their areas. Before getting started, it is important to consider the below points:
These types of regulations differ per location. Your city council and most local authorities will have set rules for minimum design and construction requirements per building. Health and safety also fall under these regulations. So, bear in mind to pay attention to every detail of your specific units.
Knowing the zoning restrictions in your area can help ensure that you comply with all the important short-term rental regulations. Simply put, these zoning laws dictate how you may use your property.
The reason that these regulations are in place is to ensure that the number of vacation rentals does not exceed what is allowed. Seen from a broader perspective, this will also limit noise, excessive trash, or parking problems.
Therefore, obtain zoning codes in your city, review planning codes, or speak to someone at your local government offices to get the necessary details and more information about zoning limitations.
Homeowner Association rules (aka HOA rules) could come into effect if you have a unit in a condo or apartment block (instead of a freestanding home). Bear in mind that these codes of conduct rules will pertain to your vacation home too.
Ensure that you inform your short-term tenants of rules such as prohibited smoking in the building, parking, or other information that they must know, to make their stay as pleasant as possible.
Stays that are subjected to longer terms might fall under landlord-tenant laws. These short-term rental laws are usually different for every city, and there might be some rights of tenants that will be considered as well.
Make sure that you always know what the local laws are, especially if you need to evict tenants from your properties who are not budging after their period of occupancy has ended.
If you are unsure about these laws, a property lawyer in your area should be able to provide more information and guide you in legislation. This way, you’ll know what the best way to proceed would be.
Vacation rentals and guest houses do not come tax-free and will likely have some tax implications attached to them. Therefore, ensure that you keep track of all expenses pertaining to your vacation rental, even something as simple as gift baskets, new bedding, or curtains.
Other important considerations that factor into your taxes include maintenance, insurance, cleaning, or any other utilities. If you are using a property management company, ensure that you are updated on all bills and expenditures.
Another big consideration that can work to your advantage is the 14-day rule in the US. This legislation states that you will not need to pay taxes on your income when renting out your vacation home for no more than 14 days annually.
Furthermore, if your vacation home is also kept for residential use for more than 14 days, or for 10% of the total days that you rent it out to your guests, you could have some exemptions.
This means that in any other cases, such as renting your property for more than 14 days per year, the tax laws of your area will be applied.
Some of the other taxes that could apply to your short-term rentals include the following
This tax is also called short-term rental tax. If it is not automatically included via a rental platform, you can consult your local government website to work out how much tenants will need to be charged.
Just as short-term rentals are seen as businesses, they can also be considered by the IRS as self-employment. Therefore, bear this in mind as this contribution will be applied to Social Security and Medicare.
When you earn rental income, you could be liable for income tax. However, you could file deductible expenses. So, check with your accountant which would be applicable for your rental.
Value-added tax (VAT) that you will charge your clients will depend on your area. Check with your local government with regards to what these requirements will entail.
Keeping tabs on hosting revenue and getting ready for a tax season creates real turmoil for busy hosts. Vacation rental software, like iGMS, can help hosts to keep track of financial reports by tracking their revenue all year round and streamlining lots of other routine tasks to save loads of time that can be better devoted to growing your business. You can, for example, use iGMS for:
Regulations for short-term rentals are different for every city. Let’s take a brief look at what the major US cities’ short-term rental ordinance calls for, and recap some of the ones that we already discussed:
About the Author
Callan Riddles is the Content and Social Media Specialist at iGMS. Callan has a passion for finding new ways to help vacation rental businesses thrive. In her free time, she loves to travel, read, and experience all the new things that life has to offer.
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