Posted by toby | Tuesday, May 2, 2017
Navigating the legalities of renting your vacation home can be anxiety inducing, or, if not done right, it can be expensive. But it doesn’t have to be. You need to be aware that you will need to pay specific taxes and have the required licenses when you rent out your home. When you need help navigating the system, Breckenridge Resort Managers can help you make sense of these complicated rules.
Local, State, and County Sales Taxes
If you rent your property for less than 30 consecutive days at a time it is classified as a “short term rental”, and you will need to charge Colorado State sales tax on every dollar and rental. In Breckenridge you are also required to collect an accommodation tax of 3.4%. This tax is reported along with the town sales tax of 2.5%. Together with county taxes and state sales tax, the total comes to 12.275%. The Town Sales and Accommodations taxes can all be collected and remitted together. It is not a requirement to submit accommodation tax separate from sales tax. When you apply for your licenses, you will be given an ID number and required to submit your taxes either monthly or quarterly. Taxes will be submitted to both the State and Town separately, and you must file a return monthly, even if you had no rentals in that month. Financial penalties are levied for submitting late, incorrectly, or not at all.
To collect sales tax you will need to have a sales tax license from the State of Colorado. The Department of Revenue collects the sales tax, so you will receive the sales tax license from this entity once you apply for the license. In addition to a sales tax license, you will also need an accommodation unit license, or BOLT License. This license is applied for through the Town of Breckenridge. You will pay a fee ranging from $75-$175, which is determined according to the size of your unit. If your rental property is outside of the town limits of Breckenridge, different taxes and licenses apply. Check this 2017 Sales Tax Rates in Summit County to determine which taxes apply to your jurisdiction.
In addition to the sales tax you are required to collect, you will need to pay income tax on your rental revenues. This can become very complicated depending on how you use your vacation rental and whether it is classified as a second home or an investment property. To take advantage of the maximum amount of deductions available, you can only stay in your home for personal use for 14 days or 10% of the days you rent the home as a second home. Deductions include property taxes, mortgage interest and more. You may want to talk to a tax professional specializing in rental property in resort areas to ensure that you getting all of the deductions available for your rental property.
Working With a Professional Property Manager
When you work with a professional property management company like Breckenridge Resort Managers, we know the ins and outs of the legalities of vacation rentals. We can help you walk through all of the important tax requirements and licensing. Be confident that you are complying with all off the necessary regulations when you work with us. When you partner with Breckenridge Resort Managers, we take all the work and hassle off your plate and take care of all the details, so you can rest easy and enjoy renting you home and collecting the revenues.
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