El Paso County property owners who rent out homes on Airbnb could see their property tax bills quadruple.
County Assessor Steve Schleiker is considering assessing short-term rental properties, such as those rented out on websites Airbnb or VRBO, as commercial instead of residential properties.
The change would mean short-term rental properties would be taxed at 29% of their value rather than 7.15%. The residential rate is adjusted each year to ensure that residential properties don’t exceed 45% of taxes collected statewide.
Schleiker said the earliest that he would make the change would be 2021, so short-term rental owners wouldn’t have to pay more taxes until 2022.
Under state law, properties available for rent for periods fewer than 30 days are considered nonresidential, and should be taxed as such, Schleiker said. He’s pushing for legislation from the state that will clarify the rate at which those properties should be assessed.
“My plan moving forward is to work with our legislators,” Schleiker said. “I’m not going to make any change in the near future.”
None of Colorado’s county assessors assess short-term rentals at the commercial rate, but officials across the state are questioning if they should.
It’s the latest chapter in the debate that’s unfolding in communities nationwide about whether properties rented out through Airbnb, VRBO, and other online sites should be regulated and taxed differently from traditional homes.
The Colorado Springs City Council imposed annual permitting fees and regulations on short-term rental property owners last year.
Some have said applying a 29% assessment rate to short-term rentals would put an unfair tax burden on people who rent their homes part time or rent out rooms of their homes while still living in them.
Others say upping the assessment rate would level the playing field for traditional commercial lodges, such as hotels and motels, who are facing increasing competition from Airbnb and VRBO.
A bill that would have required short-term rental properties to be assessed at the commercial rate was proposed during the Colorado General Assembly’s last session, but the measure died in committee, The Colorado Sun reported.
Now, Gunnison County Commissioner John Messner said he’s pitching a compromise: Properties rented out for 60 days or less each year would still be subject to the residential rate, but all other short-term rentals would be assessed at the commercial rate.
The 60-day limit would provide a loophole for residents who rent out their homes or vacation homes some of the time; however, short-term rentals would largely be taxed like traditional bed and breakfast establishments, providing more tax revenue to fund additional government services needed for commercial properties, Messner said.
He’s still seeking support for the proposal from county assessors and state legislators, he said.
Schleiker said he’s reached out to area lawmakers to discuss the issue and plans to hold public meetings to gather input from short-term rental owners before the next legislative session begins.
The Colorado Springs Independent first reported that Schleiker was weighing a switch to tax short-term rentals at the commercial rate instead of the residential rate. If the state Legislature doesn’t take action on the issue next year, he’ll make the transition in 2021, he said.
Implementing the change would be tricky. Schleiker’s office doesn’t know which homes are short-term rentals, because property owners aren’t required to report that information, he said.
While the city requires those property owners to register, other jurisdictions in the county have different rules or don’t regulate short-term rentals.
Short-term rental owners could face other consequences as a result of the reclassification, Schleiker said. Commercial properties pay different utility rates and have different insurance plans. Property owners might also get in trouble with homeowners associations or mortgage lenders.
“There are lot of things that need to be addressed before implementing this, and that’s why I feel that this is a state issue,” he said.