A few years back a CHBO property owner told us that she was switching from renting her property as a vacation rental to renting her property as a corporate housing rental. We asked her why and she said “PPD.” The CHBO Property Specialist ask her to explain. PPD she told us was, “Pain Per Dollar.” She wanted to make money with her rental property but trying to fix and flip her property nightly and weekly was just too much work. She was excited to get Corporate Rents who paid good rates but also stayed longer.
According to the 2012 “by Owner” C+orporate Housing Report:
63% of respondents say their tenants stayed on average three months or more. 9% said their Corporate Tenants stayed for a year or longer.
What does all of this have to do with taxes? Well in most states (Florida is an exception) Property Lodging Taxes need to be charged on any stay less than 30 days. CNBC was talking about this just this week US Taxman Puts Foot in the Door of Holiday Rental Apartments. If you are not charging tax or even worse, charging the tax but not turning it in, you could be facing HUGE fines. In recent years the IRS has specifically been looking into all these private property vacation rentals that have not been charging the required lodging tax.
My true Story: Through my property management company we have a lodging tax license and charge and submit taxes on stays less than 30 days. Many years ago I rented a property for a week to a non-profit who showed me their tax exempt status so I did not charge the tax. During a city tax audit I was found in fault of not charging the tax.
Why: Turns out the non-profit was Federally exempt, State exempt BUT NOT City exempt and the city wanted their lodging tax. The fine assed on my company was over $4,000 for a $400 mistake. Now I always charge tax and they can get the credit on their tax return.
- Watch Out for Nightly and Weekly Rental Taxes Issues.
- Corporate Housing Property Owners – Don’t Get Caught by the Tax Man! Beware of Lodging Tax Increases
- Buying Real Estate? Corporate Housing vs Vacation Rental.
- Sea Captain Tells His Story About Becoming A Landlord.
- Should you play “Let’s Make a Deal” with renters, buyers and everyone in between?