New York City is one of the most expensive places in the world to live, work and play. Many residents who travel frequently or who maintain another home elsewhere often find it financially advantageous to rent out their homes for extra income.
If you’re considering renting out your home via Airbnb, VRBO or any other vacation website, you need to consider whether or not you can legally rent your home. You should also think about how the extra income will affect your taxes.
What to Consider Before Renting Your NYC Home
One of the first things you’ll need to do is determine whether or not you must comply with the strict license and code requirements in New York City. The Multiple Dwelling Law prevents Class A dwelling owners from renting out a home for a period of less than 30 days, unless the renter is a “boarder, roomer or lodger.” However, if you share your home with a guest who is present for the duration of the rental, the Multiple Dwelling Law does not apply. This assures the safety, peace and privacy of fellow residents.
There are also zoning and rent control considerations. The New York City Zoning Code defines whether or not your home or building must adhere to hotel zone codes, while the Administrative Code establishes rules for rent stabilized and rent control properties. Your tenant must comply with the HOA or condo/co-op rules established by your building. An owner of a property used as a transient residence must also pay taxes concerning occupancy or tourism, sales tax, use tax, and possibly hotel or room fees.
Taxes on Rental Income
Although renting out your residence may sound tempting – rates and demand for NYC apartment rentals are robust, and occupancy rates are perpetually high – the extra income requires paying additional taxes on your federal and NY state income tax returns. Navigating City residency codes and properly reporting this income is often complex. It’s easy to make mistakes – mistakes that can cost you a hefty portion of your new income through penalties and fees.
Avoiding costly disputes with tax authorities is best accomplished by partnering with NYC tax accountants who understand how to report real estate short term rental income. Our tax accountants have experience working with clients who earn this kind of income, and we can help you avoid or manage issues with the IRS, New York State and the City. For more information on the tax consequences of short term real estate rental income in New York City and the tri-state area, call or email 212 Tax today.