Monday, July 25, 2016

Zen and lodging taxes

Be the tax, Danny.”

Lodging taxes get a bad rap.  The topic of “taxes” generally makes people squirm and conjures up ominous images of black-suited tax agents.  When someone purchases a vacation rental property, the concept of taxes is frequently far from their minds.  As lodging taxes face increasing scrutiny in the vacation rental industry, it’s easy to view this process with contempt.  However, if you can put aside for a moment any negative preconceptions you may have regarding lodging taxes, you may find that there are many possible reasons to view taxes in a more positive light – especially if your rental is located in a popular travel destination.

“Tax on, tax off.”

I can probably guess what you’re thinking.  Lodging taxes are a pain, pure and simple.  What good are they?  Well, here are just a few ways that may help you look at lodging taxes in a different way and how you may actually benefit from them:

·   You don’t pay sales & lodging taxes out of pocket:  Sales & lodging taxes are paid by your guests, not you.  You’re responsible for collecting the taxes and filing the returns, but you guests are the ones actually paying the tax.

·   Taxes help your town’s infrastructure:  If your property is in a popular tourist area, the majority of your community’s revenue likely comes from travel and tourism-related taxes.  A good chunk of those tax dollars are commonly reinvested in improving your town’s infrastructure to keep your community attractive and attract future visitors.

·   Taxes legitimize the vacation rental industry:  There are some hotels that would love to see less competition in the lodging space.  Certain companies have led a charge on banning the vacation rental industry on the grounds that owners aren't collecting taxes from their guests.  By embracing taxes, we can ensure that vacation rentals (and their owners) continue to thrive for many, many years to come.

So you see, taxes aren’t all bad.  The return filing process may be tedious, but by collecting and remitting lodging taxes, you actually benefit in the long run.  If you accept them – no, embrace them!  you will see the benefit.  But in the off chance you still don’t want to deal with the hassle, we can help.


Monday, July 18, 2016

Two great (free!) resources for vacation rental property owners - both new and experienced

Vacation Rental guides

Congratulations on owning a second home or vacation property!  And congratulations too for being an astute business persons and looking into the benefits of offering your home as a short-term vacation rental.  Whether you are just getting started or are already actively listing your property on popular vacation rental platforms like Airbnb, HomeAway, VRBO, or FlipKey, there are always new tips and tricks to learn.

Our friends at HomeAway and EvolveVacation Rental Network have put together two handy guides (free!) with a ton of useful information – especially if you’re just getting started.  But even if you consider yourself a vacation rental expert, there could be something you missed and it’s worth perusing these guides.  They’re relatively short reads yet chock full of great insights and advice.  Don’t take the chance that you could miss a quick suggestion or delighter to turn your guests’ experience from “meh” to “wow!”

The first from HomeAway is a step-by-step guide to renting you vacation property.  It’s a primer to make sure you’re ready to start accepting guests and every step necessary to get you to that point.  HomeAway’s Renting Your Vacation Home:  a step-by-step guide is a resource you’ll want to keep handy.

Evolve’s Ultimate Vacation Rental Success Guide is a bit meatier and will help you really optimize your vacation rental property listing and business.  This tutorial is more in-depth and detailed and can be viewed as a “how to” – how to step up from the basics of home renting and move confidently into the big leagues.  The only cost is an email address!  And be sure to study page 8 in Legal & Tax Preparation for some sound advice about lodging tax compliance (hint, hint)!

Wednesday, July 13, 2016

Tax challenges for short-term renters

There is a lot of misunderstanding regarding lodging taxes and how they’re defined – what they are and what they aren’t.  In this episode of Will’s Whiteboard, we clear up some of the common misconceptions around lodging taxes.  Check out our informative video and in less than four minutes, you'll be much savvier regarding lodging tax.

Monday, July 11, 2016

Everything you ever wanted to know about lodging tax (but were afraid to ask!)

The world of lodging taxes can be murky and intimidating.  Many owners of vacation rental properties are simply unaware that they need to charge & collect lodging taxes from their guests – and then file lodging tax returns & remit tax payments.  Some may have heard about lodging taxes but don’t really know what they are and aren’t sure they apply to them.  Others have gotten the cold wake-up call in the form of a nasty-gram from a tax jurisdiction informing them that they owe back taxes – potentially with fines and interest on uncollected lodging taxes.  Urp!

We’ve seen and handled the spectrum.  From the innocent inquiry – “Um, can you please tell me if I need to be charging lodging tax?” – to the panicky “HELP!!  I just got a letter from the county saying I owe thousands in back taxes!”  It’s easy to understand why people are so confused by lodging taxes – and it’s why we’re here to help.  Here are a few things to note about lodging tax.

It’s called different things but means the same thing

Lodging tax, occupancy tax, hotel tax, stay tax – they all refer to a type of sales tax on short-term rental revenues.  This is just the first layer of complexity but perhaps the easiest to get past.  It’s important to understand how the tax jurisdictions governing your property’s location define “short-term,” but typically, any rental of 30 consecutive days or less is taxable.  Most jurisdictions exempt rentals over 30 days from taxes.  Most – it’s not always the case, which leads to the point that…

Tax rules and regulations differ by jurisdiction

There are literally thousands of tax jurisdictions across the U.S. and there’s a good chance that your property is governed by at least three of them – the city, state, and county where your property resides.  Each has their own tax authority which means – you guessed it – three separate lodging tax rates (and three separate tax returns).  And possibly differing rules on applying those individual rates.  You must add up each of these rates to determine the total lodging tax rate to charge your guests.  Still following?  Good, because…

Tax due dates can also vary by jurisdiction

When you collect sales & lodging taxes from your guests, you’re required to file them in a timely manner as well.  The timeline in which these returns are due can vary but is often monthly or quarterly.  But your city taxes could be due monthly, your county taxes due quarterly, and state taxes due annually.  It’s a challenge to even the most disciplined bookkeeper to sort out and keep track of how much is due to which tax agency and by when.  Then comes the fun part of actually filling out a return, cutting the check and mailing hoping that you’ve got it all right and that you’re going to make the filing deadline!  The key consideration driving the need to comply with lodging taxes is…

You’re in business

In a nutshell, if you’re renting out a room or an entire home, you’re effectively operating a hotel business in the eyes of the tax authorities and must collect lodging tax from your renters.  This means that you need to first register with the tax authorities and obtain any required business licenses or tax collection permits in order to rent your property legally and charge tax.  Again, the requirements and application process for obtaining these licenses vary by jurisdiction.

All this can require a lot to effort simply to remember and keep organized – to say nothing of actually filling out and filing paperwork and paying taxes.  If you don’t want to deal with understanding all of the complexity of your lodging tax requirements, and the burden of filing tax returns and remitting tax payments, let us automate your lodging taxes so you can instead focus on booking your property and keeping guests happy.

Friday, July 8, 2016

Top tips when considering buying a vacation rental property

Owning a vacation home can be a wonderful experience with many benefits.  It can be your escape to the mountains, beach, or wherever you like to relax and unwind.  Many property owners have also discovered that renting their property out when they’re not using it can be an excellent way to offset the cost of ownership, pay down the mortgage, or simply earn additional income.  Whatever the case may be, here are a few things to keep in mind as you consider entering the world of vacation rental ownership.

  1. If you are renting your property to guests, it is considered a vacation home. This would include homes, lake houses, condos, mobile homes, house trailers, or yachts.  And, if you rent out your home to guests, you likely must collect taxes on all rental payment transactions.  Check with your local tax authorities to find out what their specific requirements and regulations are.  Most of the time, rentals of 30 consecutive days or under are taxable, but this varies by jurisdiction.

  2. To evaluate a potential vacation rental home investment, look at comparable rental rates on sites like HomeAway and VRBO.  In general, real estate will increase in value over time but certain markets will have a greater upside over time.  Evaluate how the market has performed historically and identify areas of growth that can lead to greater returns.  Additionally, ensure that the zoning laws and boundaries in the area allow you to rent out your home to guests.

  3. Manage your vacation rental like a business. Owning a vacation rental is a great way to earn extra income but it isn’t “hands off” – the most successful owners are diligent and meticulous in managing and maintaining their property.  You must remember that your guests are relying on you to have a great vacation which means their experience should be as painless as possible.  You will likely have to do general maintenance on your vacation home and provide things like extra linens and towels and amenities like basic condiments and coffee filters for guests to use.  In popular areas, the vacation rental market can be fiercely competitive so it’s important to research how others are marketing their properties and highlight features of your property in your own marketing efforts that make it stand out -- like the ability to accommodate special occasions, perhaps.  Of course, there’s the associated lodging tax rates and regulations.  Don’t forget to collect the necessary tax revenue and file the proper rental taxes for your city, county, and state!