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Tax Relief for NJ Renters on Transient Accommodations

Sep 3, 2019

Many owners of New Jersey rental properties who rent them out personally received some welcome news on August 13, 2019, when New Jersey amended the October 1, 2018, law that imposed a 6.625% sales and use tax on transient accommodations (as well as the occupancy fee). Under the revised law, only rentals that are professionally managed or rented through a marketplace or travel agency are subject to the sales and use tax. This is a significant change from the law as originally enacted in October, which applied to a wider array of taxpayers.

“Transient accommodations” are defined as rooms, groups of rooms, or other living spaces including buildings used as residences. This definition encompasses most residential rental properties, such as shore rentals, and as a result subjected most residential short-term rentals to sales and occupancy taxes. With the original bill, the main rental properties exempt from sales and occupancy taxes were those executed by a real estate broker licensed by the New Jersey Real Estate Commission and where occupancy occurred for at least 90 consecutive days. While this helped those owners who were renting as a permanent residence, this left most short-term rentals subject to the tax.

As of August 13, rentals that a homeowner facilitates directly will not be subject to the tax, no matter the duration of the occupancy. Homeowners can use local newspaper ads, personal referrals and signage and still qualify for the tax exemption. Rentals that are still subject to tax and have not been affected by the amendment are those properties that are professionally managed or rented through a marketplace. Professionally managed units are those that are directly or indirectly owned or controlled by a person offering for rent two or more other units during the calendar year. Transient accommodations rented through marketplaces include those rented through websites such as Airbnb and Craigslist, as well as through a traditional travel agency.

Thus, while people who use websites and travel agents to rent their properties remain liable for collecting and remitting these taxes, at least those who “do things the old fashioned way” by posting their own ads in newspapers, collecting money themselves, and who only rent one or two properties have at least been granted some relief.

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Amanda Ammerman

Amanda Ammerman is a Tax Senior Manager with 10 years of public accounting experience.

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