Short Term Rental Tax Information
On December 28, 2018, Governor Baker signed into law a bill regulating and taxing short-term rentals of homes and condos. A short-term rental is defined as a rental period of 31 days or less. Annual and long-term (32 days or more) are excluded from this tax. We are currently working on updating the language and charges in our leases and on our website in order to be in compliance with this new law. However, many aspects are still undetermined and may change in the next six months. In order to help you understand this new law and to help you comply with the new regulations we have compiled a list of questions about the new regulations and taxes. If you would like to read the new bill in its entirety, Session Law – Acts of 2018 Chapter 337.
For more local information the Town of Eastham has updated their website with information on the Rental Tax. Town of Eastham Website Information Page
When did the tax go into effect?
The tax went into effect on January 1, 2019. Any lease signed on or after this date for a rental term beginning July 1, 2019, or later must include the rental tax. This means that all rentals starting before July 1, 2019 (January through June 2019 rentals) will not be taxed.
Is the tax retroactive?
The tax is not retroactive. All advanced repeat rentals and new rentals taken before or on December 31, 2018 will not be taxed.
How much is the tax?
The tax is the total of these taxes:
State tax: 5.7%
Local tax: up to 6%. Each town has a tax rate in effect, however, these rates may change before the July 1ststart date. Currently the town tax rates on Cape Cod are:
The Cape and Islands wastewater treatment tax: 2.75% will be applied to all towns in Barnstable, Dukes and Nantucket Counties. Every town in Barnstable, Dukes, and Nantucket counties are automatically opted in; their legislative body can opt out with a 2/3rds vote. Currently no town has opted out.
A Community impact fee of up to 3%. This is an optional tax a town can add via their legislative body for those who own multiple properties. To date, no town has adopted this tax in Barnstable, Dukes, and Nantucket counties. The Massachusetts Association of REALTORS has produced a Short-Term Community Impact Form for homeowners to sign that certifies that they own only one unit to rent in a given town. STR Community Impact Disclosure Form If you only own one rental unit in a given town, we recommend that you sign this disclosure and forward a copy to our office.
Are there any exemptions to the law?
The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year. However, you are still required to register your home and provide insurance. (See below for more details about registration and insurance requirements). If you know that you will not exceed the 14-day limit, please download and sign this STR 14 Day Disclosure Form and return to our office. You must also file notice with the Department of Revenue stating that you will only rent for 14 days or less and will be responsible for paying the taxes if rented for more than 14 days and did not collect it for the first 14 days.
Who pays this tax?
The lodging tax is to be paid by the renters similar to any tax paid at a hotel or motel. A lodging tax for private rentals is common in many parts of the country, including every other New England state, so vacationers are becoming increasingly accustomed to paying one. No one is excluded and renters will have to pay this tax no matter which home they choose.
Who will collect the tax?
Whoever collects the rent from the tenants is responsible for also collecting the lodging tax as a separate fee. As an appointed “operator’s agent” or REALTOR, Hopper Real Estate/Outer Cape Rentals will collect this tax when the balance of the rent is paid and remit it to the Department of Revenue on your behalf. The Department of Revenue has yet to issue regulations to clarify how often the tax should be remitted and how to remit it. Currently we are adding and collecting these taxes on any lease made after January 1, 2019 that begins on or after July 1, 2019 at the current state and town rates. We are also notifying tenants about these new laws and that the tax rates could change before their stay begins.
What items are taxable?
Taxable items include the rent and any other non-refundable charges, including cleaning, linen, or pet fees. Refundable security deposits are not taxed.
Do I need to register my home?
You will be required to list your home on the state short-term rental registry using MassTaxConnect if you rent your property. The Department Of Revenue is currently working on making changes to the registration process due to the new law and the registry is not ready as of yet. We will update you as soon as we receive more guidance from the Commonwealth. Additionally, your town may also require a separate registration and registration fee. See a list of the towns that currently require registration.
Are safety inspections required?
Towns may implement a health and safety inspection requirement and determine the frequency of the inspection. Homeowners would be required to cover the cost of the inspection.
Am I required to carry insurance for my home?
The new law requires homeowners to maintain $1 million dollars in liability insurance to cover a rental home. The coverage is required to defend and indemnify the owner and any tenants in the home for bodily injury and property damage. Check with your insurance agent to be sure that you have adequate insurance coverage. The Massachusetts Association of REALTORS has created an STR Insurance Disclosure Form for REALTORS to use with owners to disclose this insurance requirement. We recommend that you review and sign this disclosure and return it to our office.
We will continue to update you as we learn more and receive guidance from the Towns, Commonwealth, and Department of Revenue, but in the meantime please feel free to contact us with any questions.
The Hopper Real Estate / Outer Cape Team