The state of Colorado has some proposals in the works that would raise the property tax rates on short term rentals. We have been hearing rumors of this happening since late last year. It sounds like now they are working on something to make it a reality. We need both facts and opinions about the change from as many short term rental owners in Colorado as possible.
Adjusted Property Tax Rate
The tax hike would change the tax rate of a residential property that is short term rented. Residential properties are currently taxed at 7% in Colorado. The proposal would increase the tax rate to the commercial property rate of 29%. For example, if you own a residential property worth about $318,000, you would pay about $1925 in taxes. That same property at a commercial tax rate would run you about $5000 a year in taxes. It’s a pretty substantial change.
Another angle they are considering is to only charge the higher tax rate for those that have more than one short term rental property.
Your Impact
What we would like from you is information about how the change would impact you, if at all.
– Would you sell your rental property?
– How would it impact your bottom line?
– Would you long term rent your property instead? Those would not be subject to this higher tax rate
– Would you think twice about buying another short term rental property in Colorado?
– Would you adjust your nightly rates?
– Any additional information or comments about the change?
We’re Taking Action
We will pass all the info along to our local real estate board. Then they will compile all the data and pass it along to the Colorado Association of Realtors. The Realtor associations have some influence with the legislators and we want to put the voices of the short term rental owners in front of them before they decide to raise the property tax rates on short term rentals in Colorado.
Add Comments
Please enter comments below. We will share them and have our voices heard.
Thanks for posing this. Curious where the issue stands now? We are vacant land owners getting ready to build our dream home (future retirement home). Given the costs and high interest rates, we’d have to rent out occasionally to make the mortgage payment. The change to “commercial” status would cause us to 1) increase our rates and 2) potentially sell the property rather than using it as a vacation/retirement home. They already charge license fees and personal property tax on things like beds and appliances (crazy).
Nothing further has happened with this yet. I still see this as a possibility in the future. Our new property tax assessments just came out. The steep increase has made lawmakers strategize about how to keep the tax bills more manageable. I haven’t heard talk about this change being a solution but it wouldn’t surprise me if it comes up as a way to have the second homeowners pay the higher tax bills so the lower income homeowners can have their property taxes lowered. I think there would still be steep opposition to this type of change.
Many areas have implemented short term rental caps where no more licenses are even available. Because you haven’t built yet, you have some time for this change to be somewhat normalized, however, you should know what the short term rental rules are wherever your property is located.
Keep in mind for both of these concerns, a short term rental is typically less than 30 days. If you rent for a minimum of 30 days at a time, neither of these would apply to you.
Realtors thrive on the ever inflating value of real estate, even at the cost of what was once a tight-knit community. Speculative investing and second/third/etc-homeownership has permanently transformed mountain towns all over Colorado. The real estate lobby is too strong and too money thirsty to even consider regulating this change. Sad.
I think it’s the state government feeling left out of the short term rental profits homeowners are making. They want a piece of the pie and changing the tax rate gives them a slice. It’s up to homeowner’s through their local real estate agents to use the real estate lobby to give the opinions of homeowners to the government officials that make the decisions. If no action is taken, the government will do what they want. At least if opinions are passed along, there is a chance they will be heard.
Jason & Meredith, I see this has currently been postponed, however offer feedback for future considerations. Although we are currently not a short term rental property owner, the new tax rates would cause us not to further invest in Summit County. Hotels are not the same as individual residences. They are commercial properties with corporate infrastructures. In summary;
How would higher taxes impact you:
– Would you sell your rental property? “Yes”
– How would it impact your bottom line? “Significant impact, rental rates would be non-competetive, cost prohibitive to invest in Summit County.“
– Would you long term rent your property instead? Those would not be subject to this higher tax rate. “No we would sell property and invest elsewhere. We currently long term rent our properties, already the State of Colorado has imposed a new tax on improvements, benefits of appliances installed.”
– Would you think twice about buying another short term rental property in Colorado? “Yes, would not buy in Colorado”
– Would you adjust your nightly rates? “Yes, increase rates until property sold and pull investments out of Colorado”
– Any additional information or comments about the change? “Would pull out of all current investments and relocate assets.”