If you list your property as an Airbnb or as another form of short-term vacation rental, and it has been classified as a seasonal recreational, that’s about to change.
In January, 2019 the Cook County’s Assessor’s Office will send out notifications to these property owners that their property has now been classified as Residential Non-Homestead.
“It doesn’t mean they (owners) will pay more in taxes, some will even pay less,” Cook County Assessor Todd Smith told the county board on November 15.
But the new classification means more of the collected taxes will stay in the county.
These notices will go out to everyone who lives outside of the Grand Marais city limits, added Smith
“Grand Marais may join us in the future, but they are working on their own way of dealing with this issue at this time,” Smith said.
Cook County has approximately 300 short-term vacation rentals and 320 housing units rented as VRBO’s through area resorts.
Purchases of houses and cabins that are used for short-term rental vacation property have been on the rise in Cook County, Smith told the commissioners. He said he wasn’t sure what has been causing the increase, but noted that some folks have purchased these properties as investments, and not cabins.
“This issue has consistently been brought up since I returned to Cook County in 2015. The growing number of these VRBO operations has created situations in parts of the county, that are popular places to put them, and made value increase based on sales,” Smith said.
As reported in 2017, Grand Marais was the fifth hottest area in the state for Airbnb guests with 3,360, which brought in $433,000.
Minneapolis was the top Minnesota location with 78,900 stays, which took in $10.8 million. St. Paul was second with 19,930 visits taking in $2.6 million, Duluth was third with 9,530 stays, which brought in $927,000, and Rochester was fourth with 7,280 stays bringing in $1.6 million.
Lutsen was eighth on the list with 1,670 stays, which took in $273,000.
Two Harbors and Ely were sandwiched around Lutsen on the top ten list, which shows how attractive northeastern Minnesota is for visitors.
Other counties with high VRBOs have been looking to see what Cook County is going to do, Smith said.
“I get calls and requests for information,” from other county assessors who have wrestled with just how to properly classify VRBOs in their counties, noted Smith.
While Cook County may end up with as much as $300,000 more in tax dollars per year from the new classification, that was a lucky result, but not the reason for the change.
“We studied the statutes and this is what we think they say,” said Bob Thompson, who works with Smith in the Assessor’s Office. “We just want to get this right. This has been a murky area for a long time and we would like to see the state get some uniformity and clarity for these classifications,” Thompson said.
The IRS has been keeping tabs on short-term vacation rentals since the mid-1970s, added Thompson.
Both Thompson and Smith have worked for months to make sure the new classification system meets state guidelines for short-term vacation rental property.
“We have been asked by many tax payers what the county can do about this issue,” Smith said. “The classification is the only thing that the assessor can change in regards to these rentals. So we did.”
When asked if the county needs approval from the state to make the change, Smith replied, “We do not need the state approval to make this change as the DOR has consistently given that responsibility to the county assessor.”
Leave a Reply