House Rental

Many homeowners are listing their houses for guests using popular services, such as Airbnb, Vrbo and FlipKey, particularly through the summer months. If this is something you do, or are planning to do, be prepared to pay a number of taxes as part of the reservation process. As a host, you are responsible for knowing and paying occupancy, city and state tax obligations.

These service providers may collect and remit taxes on your behalf under their Occupancy Tax provisions. Presently Airbnb is able to facilitate the collection of these taxes in RI, CT and MA.

14-Day Rule – Income Taxes

There is at least one circumstance in which you do not have to pay taxes on rental income. If you follow the 14-day rule, you won’t have to pay income tax from short-term rentals. The 14-day rule applies if:

1) you do not rent the property more than 14 days during the year, and

2) you use your ‘vacation’ house 14 days or more during the year or at least 10% of the total days you rent it to others.

The 14-day rule also applies when renting out just one room in your house. If you rent it for 14 days or less, you do not have to report the income on your taxes. However, you cannot take any tax deductions either.

Because many rental businesses have reporting laws, all income you receive from short-term rentals (even if less than 2-weeks) may be reported to the IRS. Should you receive a letter from them, you will just need to prove that the income you received qualifies for the 14-day exception, so be sure to keep good records.

Rhode Island Taxes

In Rhode Island guests will pay the following taxes as part of their reservation:

  • RI Sales Tax – 7% of the listing price, including any cleaning fee for reservations that are 30 nights or less.
  • RI Statewide Hotel Tax – 5% of the listing price, including any cleaning fee for reservations that are 30 nights or less. This would be on rentals of private or shared rooms only; entire apartment or home rentals are excluded from this tax.
  • RI Local Hotel Tax – 1% of the listing price, including any cleaning fee for reservations that are 30 nights or less.

For more information about RI Sales and use taxes, please visit the RI Division of Taxation.

Connecticut

In Connecticut guests will pay the following taxes as part of their reservation:

  • CT State Room Occupancy – 15% of the listing price, including any cleaning fee for reservations that are 30 nights or less for any reservation.
  • CT State Room Occupancy for bed & breakfast establishments – 11% of the listing price, including any cleaning fee for reservations that are 30 nights or less for any reservation.

Visit the CT Department of Revenue for more information.

Massachusetts

All hosts in MA must now register their listing with the Massachusetts Department of Revenue and add the certificate number to any listing page. Those not registered will be blocked from hosting short-term stays. If you use a service such as Airbnb, Vrbo, FlipKey, etc. to book reservations, they may automatically charge, collect and remit occupancy taxes to the state on your behalf. If this is the case, you will not have to file any tax returns for transactions done. Be sure to check with their Terms of Service with regards to tax collection; you may be responsible for collecting and remitting taxes for your rental transactions. To ensure compliance, visit Massachusetts Department of Revenue requirements.

If you have a property in Boston that you wish to list, you will also need to complete Boston Registration Requirements. Some listings may be exempt from registration, which is free.

In Massachusetts guests will pay the following taxes as part of their reservation:

  • MA State Excise Tax – 5.7% of the listing price, including any cleaning fee for reservations that are 30 nights or less (for Short Term Rentals), and for reservations 89 nights or shorter for professional listings.
  • MA Local Option Excise Tax – 0 to 6.5% of the listing price, including any cleaning fee for reservations that are 30 nights or less (for Short Term Rentals), and for reservations 89 nights or shorter for professional listings.
  • Cape Cod and Islands Water Protection Fund Excise Tax – 2.75% of the listing price (for reservations in certain locations), including any cleaning fee for reservations that are 30 nights or less (for Short Term Rentals), and for reservations 89 nights or shorter for professional listings.
  • Convention Center Finance Fee – 2.75% % of the listing price (for reservations in certain locations), including any cleaning fee for reservations that are 30 nights or less (for Short Term Rentals), and for reservations 89 nights or shorter for professional listings.
  • MA Community Impact Fee – 3% of the listing price (for reservations in certain locations), including any cleaning fee for reservations that are 30 nights or less (for Short Term Rentals), and for reservations 89 nights or shorter for professional listings.

For more information about MA requirements visit Massachusetts Department of Revenue.

If you still have additional questions about your rental property and taxes, please contact us at 401-831-0200.

Leave a Reply

Your email address will not be published. Required fields are marked *