California strikes again!
California is coming after small businesses once again by assessing a business tax to Short Term Rental businesses, based not on income but the book value of their business assets.
The new STR tax
If you own an AirBnB or VRBO, expect to receive a new tax form and bill (form number is BOE-571-STR) from the county that must be filed and paid by May 7, 2024, and then every year thereafter.
This is not called the STR tax, but we are calling it what it is. California is wanting more tax from any source in its grasp. STRs have grown in California and so they see another tax opportunity.
Short-term rental businesses (even if you own it and don't have an LLC) may be required to report the basis of assets, reappraising your business property annually. This filing will require you to list out things like furniture, appliances, equipment, televisions, tables, mattresses, etc. This does not apply to the real estate itself, but the assets you hold within the real estate that you are renting out.
Similar reporting and filing requirements apply to commercial real estate properties and business owners of those properties. Now California is extending that same business tax, filing, and payment of taxes to short-term rentals.
Who does this apply to?
This new filing applies to you if you rent out all or a portion of your property.
Every business that owns taxable personal property (other than a manufactured home) having an aggregate cost of $100k or more for any assessment year must file a signed property statement with the county assessor.
If you receive a notice and feel you are below the threshold, complete and send it in to avoid fines. If you fall below the threshold, you may not receive the form or only receive the request to file every three or four years.
What is the tax?
The tax rate varies, but is usually a little more than 1% of the assessed value. A conservative estimate is 1.2% of the book value of your total assets (purchase price - depreciation).
More information by county
You can find out more information on your county's assessors website here: www.boe.ca.gov/proptaxes/countycontacts.htm
What to expect
The form will be sent by county and will differ by county. But you can view a sample form here: www.caltax.com/files/cat/BOE-571-str.pdf
New to STRs?
If you are a newbie in the California short-term rental space, you may or may not receive this notice right away. But, keep a look out as you may receive it in year 2.
If you are looking for some guidance on what you can deduct in your rental property, we have tips and free downloads in our blog post of "What can I deduct in my rental property? Tips and Free Checklist"