On July 1, 2019, a new law regulating and taxing short-term rentals in Massachusetts will go into effect. This new law expands the state’s hotel and motel tax to include the short-term rental of homes, such as condominiums, cottages, single family, and multifamily dwellings. It also applies to VRBO, Airbnb, and other short-term rental platforms.
The new tax will also be imposed on the total consideration paid by an occupant – such as service, cleaning and other charges. The new law also requires owners who rent out their rooms or homes to register with the Massachusetts Department of Revenue on MassTaxConnect and obtain $1 million in liability insurance.
While the new law is applicable to all short-term rentals (rented for a period of 31 days or less), there is an exemption for properties rented for fewer than 14 days per calendar year. If a property is rented for less than 14 calendar days per year, there is no requirement to collect tax. However, it is important to note that even if a rental property falls under the 14-day exemption, the property must be registered on MassTaxConnect and the owner must meet the insurance requirements. If the exemption applies, it must be stated so at the time of registration.
The law also requires the individual(s) collecting payment for the rental to collect the tax and remit it to the Commonwealth. This means that it is the responsibility of short-term rental platforms or real estate agents who collect rent on a property owner’s behalf to register on MassTaxConnect. All returns and payment will be due on the 20th day of the reporting month for the previous month’s occupancies. The short-term rental rate will vary by locality, but overall will include:
- Massachusetts state excise tax: 5.7%
- Local option excise: 0 - 6.5%
- Cape Cod and Islands Water Protection Fund excise: 2.75% (only for those towns and cities in those localities that are currently a member of the Fund)
- Community impact fee: 3%
Finally, any rentals booked on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax. In anticipation of the law’s effective date, owners and operators may want to disclose to prospective clients that any booking made on or after January 1, 2019 may be subject to a tax.
It is important to note, according to the DOR’s website, registration is currently under development but will be operational on the effective date, July 1st.
For other state short-term rental tax law changes and guidelines, please contact your GW & Wade Counselor or click here to view rental tax guides broken down by state.
If you have questions pertaining to this new tax law or your financial situation, please contact us. We welcome the opportunity to help you achieve your long-term financial goals.
Investment advisory services offered through GW & Wade, LLC.
The information above is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change. GW & Wade cannot guarantee that this information is accurate, complete, or timely. We make no warranties with regard to such information or results obtained by its use. Always consult an attorney or tax professional regarding your specific situation.
Clients of the firm who have specific questions should contact the GW & Wade Counselor with whom they regularly work. All other inquiries, including any inquiry concerning a potential advisory relationship with GW & Wade, should be directed to:
Laurie Wexler Gerber, Client Development Manager
GW & Wade, LLC