The Risk of Short-Term Rentals
Airbnb has been in the news quite a bit recently. Some communities are not happy with home owners using their properties as short-term rentals. There have even been a few cities seeking to limit or outlaw the practice. In this week’s #protiptuesday we will explore a lesser known pitfall of making quick cash with your home.
Renting out your home can void your homestead exemption, even if you only rent it out when you go out of town or for special events. I know several people who make great money renting out their home for The Players Championship or back when Jacksonville hosted The Super Bowl. Basically, Airbnb and similar sites just allow home owners to avoid the use of an agent.
-Don’t worry, we aren’t in that industry segment so we don’t have a horse in the race-
If you did use an agent to list your short-term or vacation rental, they would hopefully tell you to be careful. According to Florida statute 196.061 renting your homesteaded property, or renting a substantial portion of it, for more than 30 days for two consecutive years constitutes “abandonment” for the purposes of homestead exemption. If you still claim the exemption on your property taxes there are severe tax penalties. Possibly more costly would be losing the protection against large annual assessed value increases.
While the penalties in Florida are not the worst in the country (Louisiana has a maximum of 6 months in prison) they are cracking down on the huge loss of tax revenue. Short-term rentals are subject to some of the same taxes and surcharges as hotels. You know, the ones that pay for TIAA Bank Field.
In 2017 alone, Duval County identified 1,900 homeowners who were in violation, as a result they collected a whopping $11 Million. Not all of those who ran afoul of the law were using Airbnb but, the ease with which you can make some extra cash while you are not in your home has certainly driven the interest in this particular issue.
You can still make some great money renting out your home on a short-term basis. We know several families who pay for as much as 6 months of their mortgage in the week surrounding TPC. Just make sure you are well within the limits.
