MA Governor Signs Law Taxing and Regulating Airbnb and Short Term Rentals
posted Feb 5, 2019 by Steve M. Fay, CPA, JD, LLM in the Global Tax Blog
Massachusetts Governor Charlie Baker signed a law recently that will tax and regulate short term rentals, such as those rented through Airbnb. The new rules take effect July 1st and are expected to transform a market that spans the entire state of MA—from summer homes in Cape Cod to Boston apartments.
More about the bill
The bill expands the state’s hotel and motel tax to include the short term rental of homes (condos, single family, multi family, etc.) Massachusetts is one of the last states to adopt a tax on short term rentals. The bill requires every rental host to:
- Register with the state,
- Carry liability insurance of at least $1,000,000,
- Potentially pay local taxes on top of the new state levy.
The short term rental rate varies by locality and is the total of the following rates:
- State- 5.7%
- Local- up to 6% (Boston 6.5%)
- Cape Cod & surrounding islands - includes additional 2.75% to fund Cape Cod and Islands Water Protection Fund
- A community impact fee of up to 3% may be incurred locally on professionally managed properties (owners of two or more units in one town.)
For those who only rent their unit five months or less each year, the law provides for regulations, not yet addressed, to minimize the administrative burden on tax filings.
Is anyone exempt from the new law?
The tax does not apply to properties rented for fewer than 14 days per calendar year, though these properties are still subject to other requirements of the law, including insurance and registration.
Does this impact rentals booked in 2018?
Any rentals that were booked on or before December 31st are not impacted by the new law. All rentals booked on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax.
Do I collect taxes on cleaning and linen charges?
The tax applies to total consideration paid by the tenant. So if you charge them for cleaning, liens or any other services, you need to collect and remit the tax.
Did the TCJA introduce other changes to short term rentals?
Check out our blog, How does the TCJA Impact Airbnb and Other Short term Rental Hosts?
Questions on the short term rental tax rules? Reach out to our Tax Services Team.
The TCJA…So Many Changes, So Many Questions…we can help you navigate this huge tax overhaul! Visit our Tax Reform Center for everything you and your business need to know, now.