Rules and regulations of running a vacation rental business vary depending on your location. Airbnb recommends its hosts to “understand the laws in your city, county, state, province, territory and/or country (your jurisdiction).”
Vacation rental rules and regulations affect your business, for no doubt. Vrbo shows some examples of the type of regulations that could directly impact how you rent your property:
1. Nuisance issues prevent homes from operating as a short-term rental that disrupts the neighbourhood.
2. Occupancy limits the number of occupants to prevent threatening the safety of the occupants and home.
3. Registration requirements remind us of the importance of the registration process in the area our home is located.
4. Tax collection: rental owners may need to pay taxes on their rental income in addition to property taxes.
Types of Vacation Rental Rules and Regulations
In this blog, we’ll introduce you to different types of regulations you need to consider before starting your vacation rental business. To expand on the regulation types, we go through Airbnb’s recommendations at “What regulations apply to my city?” We’ve added to each section links and information on different locations. However, the list might not be exhaustive, and you need to check the accuracy of the information below with the laws in your area.
Do You Need a Business License to Start a Vacation Rental Business?
Check with your local jurisdiction if you need a business license before operating your vacation rental business. Whether you rent out a room or your entire home, you’re still required to get a business license in most places. While searching for a business license, you may need to google Transient Occupancy Tax (TOT) or Land Use Permit on your city website.
How to Comply with Building Standards on Habitability, Health, and Safety
You need to comply with a list of building standards and safety regulations to get a license to run your vacation rental business. In some cities, jurisdictions require an inspection session report to grant a vacation rental permit. The accreditation process in the UK can be processed with Short Term Accommodation Association (STAA). The annual accreditation is awarded after taking the necessary steps.
How Zoning Rules and Restrictions Can Affect Your Vacation Rental Business
Zoning rules set out the way you can use your property/home. According to zoning restrictions, you might not be able to use your property as a vacation rental! These rules are set to prevent any disturbance for the people of that area.
Tax Considerations for Vacation Rental Managers
If you own a vacation rental, you may need to pay:
4.1 Tax for the Property
You need to pay tax for your property according to your usage of it over the year. It means that if you use it as a vacation rental and some days for personal use, you will pay different taxes compared to using it as your home.
4.2 Tax for Each Overnight Stay
You will be required to collect a tax for an overnight stay. In some areas, Airbnb collects local taxes on behalf of the hosts. In what areas is occupancy tax collection and remittance by Airbnb available? Read more here.
4.3 Tax for Income and Expenses
This tax belongs to your income when you have deducted the expenses from it. The “income” is the total amount you collected from rent, cancellation fees, and the security deposit that you have not returned. The “expenses” vary from cleaning fees to utilities and marketing. You need to ask for the details of income and expenses from your local jurisdiction.
In the US, the 14-day rule may cause an exception for you to pay tax. According to Turbotax, you don’t pay tax on income you earn from the short-term rental, as long as you:
– rent the property for no more than 14 days during the year AND
– use the vacation house yourself 14 days or more during the year or at least 10% of the total days you rent it to others.
If you have questions about vacation rentals’ taxation in the US, you might find this overview helpful. Ernst and Young’s United States “General guidance on the taxation of rental income” (English) gives you an overview of tax return forms for income tax only.
Tax regulations are the most complicated of the rules that vary from one place to another.
What Is the Importance of Landlord-Tenant Laws?
In some locations, the law recognises the guest as a tenant if she or he stays more than a specific period. It will cause difficulties in removing the guest as the rights of tenants will protect them.
Vacation Rental Rules and Regulations – Conclusion
Although OTAs facilitate vacation rental management as a starting point for making money by renting out the spare room of your house, there are many regulations that you need to follow to get a permit for operating your vacation rental. Even after getting all the licenses, your short-term rental requires constant control for tax payments and other payments in the form of business licenses’ extensions.
You need to get help from your local jurisdictions to ensure you have not missed any of the steps. Below, we’ve put two helpful links about vacation rental regulations in two different locations as examples.
2ndaddress has compiled a summary of short-term rental restrictions in major U.S. cities.
Keycafe blog provides a comprehensive overview of Amsterdam’s short-term rental regulations.
