Rental investment properties are still as popular as ever. Even during a pandemic, people want to get away and a short-term rental is often the easiest way for them to do that and remain socially distanced.
If you are thinking about turning a home or condo into a short-term rental property, there are some things you need to know about local tax laws before you take the plunge.
CAN I RENT MY HOME?
In Fountain Hills and Scottsdale, there are few deed restrictions when it comes to renting your property. However, many HOAs (Homeowner’s Associations) have regulations in place to protect the residents in the neighborhood. Be sure to start by reading your HOA’s rules and regulations.
HOW LONG CAN I RENT IT?
There are generally no restrictions about the length of time your residential property can be rented. Yet, to enforce local tax codes, many cities such as Fountain Hills and Scottsdale are auditing online rental services to determine if short-term rentals are renting daily vs 30-days or longer.
WHAT IS THE TAX CODE?
Short-term rentals are subject to city tax requirements. In Fountain Hills, taxes for long-term rentals, defined as more than 30 days, are 1.6%. If the activities are less than 30 days, the owner is subject to paying hotel (or bed) tax rates which can be as high as 10%.
HOW STRONG IS THE ENFORCEMENT?
Most states, including Arizona, realized how much tax income was leaking out of the system through short-term rentals. As a result, they have cracked down on rentals through such online sites as VRBO, Homeaway, and AirBnB. These taxes previously came through the hotel bed taxes and are now being shared with these online rental companies.
WHERE CAN I GET MORE DETAILS?
The following links contain useful information provided by the Arizona Department of Revenue:
- https://azdor.gov/sites/default/files/media/TPT_RATETABLE_10012018.pdf (this is a great resource for hotel/bed tax rates at both the state and local level!)
Here’s a great article that addresses these issues, written for short term rental property owners: https://www.avalara.com/mylodgetax/en/resources/vacation-rental-tax-guides/arizona.html