In recent years the number of short-term rentals (think VRBO, AirBNB, etc.) has grown considerably. California has noticed this growth and has enacted a new property tax on short term rentals beginning January 1, 2024.
According to the California Senate Bill No. 60, Chapter 307, a short term rental in California is a property or portion of a property (i.e. room) that is rented for 30 consecutive days or less.
While the California Board of Equalization (BOE) oversees the implementation of property taxes, the taxes are actually assessed at the county level. A sample of Form BOE-571-STR is available on the BOE website, however the actual form may vary slightly and will be provided by the county where the rental property is located. Similar reporting is already required for commercial real estate properties and their owners so this now extends the requirement to short term rental property owners.
The IRS tax treatment for short term rentals can vary based on many factors including the length of rental period, the amount of involvement the owner has, and services offered to the renter. However, the BOE considers all short term rentals to be a trade or business and subject to personal property tax. All taxpayers with a short term rental property (including a room within a house), are required to file and pay personal property taxes on Form BOE-571-STR due on May 7, 2024 and then every year going forward.
This will require that your business property (the actual real estate) may be reappraised annually. It will also require that personal assets within the property be listed and taxed; including but not limited to furniture, appliances, equipment, televisions, tables, mattresses, supplies, artwork, outdoor furniture and equipment (BBQs, playgrounds, hot tubs, lawnmowers, etc.), even towels and bedding. A separate statement will be required for each location even if they are held within the same LLC or other entity.
While the California Board of Equalization oversees the implementation of property taxes, the taxes are assessed at the county level. The tax rate also varies based on the county but for California 1.2% is the average.
If you have questions about these new policies, your rental properties, or other tax situations our tax experts are available to consult with you.
Aura Advisors, an Accountancy Corporation is a boutique tax consulting, compliance, and representation firm working with affluent individuals and owners/officers/founders of start-up/emerging growth companies. Building connections beyond the code.