The Twin Cities has been and continues to be a popular site for National events, mostly in the sports genre. The next event that the Twin Cities is buzzing about hosting is the 2018 Super Bowl. With this kind of national exposure, Minnesota residents are searching for opportunities to take advantage of the increase in tourism.
With the current media exposure for sites like Airbnb, short term rentals are gaining in popularity for their simplicity and tax benefits.
However, these short term rentals may not be quite as easy as they may seem. Depending on the location and type of home you hope to rent out, you may have issues with zoning codes, specific license compliance, and association rules. The fines for violating any one of these could outweigh any income you may hope to earn. Additionally, should any of your guests get injured, you could have a whole host of issues that you did not plan for. And don't forget the cost of sales tax compliance.
Even with the risks, there are tax benefits to these short term rentals. Income earned from renting out your main home for two weeks or less is not taxable and does not need to be reported on your income tax return. The downside is that any expenses you incur to rent out your home are also nondeductible for tax purposes. Therefore, if the expenses you incur such as license fees, additional insurance, cleaning and any repairs exceed the income received in the activity, there is no tax benefit.
In the end, short term rentals can be a great money making strategy as long as the risks don't outweigh the reward. Make sure that you do the research to stay in compliance and contact your insurance and tax advisors with any questions.
