Rental Tax – Are You Feeling the Impact Yet?

With the advent of the short term rental tax in 2019 it is time to look back to see how it has impacted the market a year later. The bill, commonly referred to as the Air bnb bill, did not create a new tax on short term rentals, rather it subjected short term rentals to the existing room occupancy excise tax that consumers were already paying on hotels, inns and motels.

The real estate lobby successfully fought the tax for at least 15 years, and as a result, Massachusetts was one of the last states to adopt it. According to the National Association of Realtors only Nevada, Delaware, California and Alaska have not adopted some sort of state excise tax on short term rentals. A slight softening in the 2019 market is likely push back as a result of the tax, however, consumers are sure to realize that no other vacation destination can replace our special island.

On Nantucket the rental tax paid by tenants is currently 11.7% of the rental amount. If you are a homeowner who has seen a decrease in activity, you may consider a small reduction in your rental rate. This will help to offset the additional expense of the tax. Multiple homeowners have tried this with great success. Tenants feel less targeted by the tax when homeowners are willing to share the burden.