Short-term rental services like Airbnb and VRBO are becoming a popular alternative to hotels for many travelers. For homeowners renting their property to travelers, these sites make it possible to earn some extra income.
While this seems like a mutually beneficial agreement for both sides, homeowners can run into legal issues if they're not informed of Wisconsin's short-term rental laws. If you're thinking about hopping on the trend of renting your property for short-term use, here's what you need to know first.
What is a Short-Term Rental?
In Wisconsin, some laws and regulations impact short-term rentals. The state legislature defines a short-term rental as "a residential dwelling that is offered for rent for a fee and for fewer than 29 consecutive days." (30 consecutive days effective 10-1-2021).
Cities, villages, towns, and counties cannot enact or enforce an ordinance that prohibits the rental of a residential property for seven days or longer.
If a residential home is rented for periods of at least 7 but less than 30 consecutive days, the city, village, town, and county may limit the total number of days within the year that the property may be rented to no fewer than 180 days, and those days may need to run consecutively.
Rentals of 6 or fewer days are subject to additional regulations.
You May Need a License
The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) requires all lodging facilities in Wisconsin to hold a current tourist rooming house license.
Renting your home could be considered "tourist rooming," which covers all lodging places, including:
- Hotel: Sleeping accommodations are provided for paying travelers in 5 or more rooms, and they are all related rooms, buildings, and areas.
- Motels: The same guidelines as hotels, except guest parking, are provided as part of the room charge.
- Tourist Rooming House (TRH): Includes all lodging places and tourist cabins, not including hotels or motels where tourists or transients pay for sleeping accommodations
- Bed and Breakfast (B&B): Lodging that provides eight or fewer rooms for rent to no more than a total of 20 guests for more than ten nights in a year, and is: the owner's personal residence, occupied by the owner at the time of rental, and the only meal served to guests is breakfast.
Therefore, if your property falls under one of these categories, you will need to hold a current license. You may also need to obtain a license from the city, village, town, or county if they enact an ordinance requiring a license for short-term rentals.
Consider the Tax Implications
Property owners who list Airbnb, VRBO, or other short-term rentals that are located in Wisconsin may have to pay state sales tax and local room tax.
Wisconsin's Department of Revenue (DOR) states that anyone who makes rooms or lodging available to the public for periods less than one month (or 30 calendar days) must report and pay sales tax. Sales tax depends on the location of the rental. Additionally, a basic room tax, an additional room tax, and a municipal room tax may also apply. These taxes are subjected to certain caps depending on the location.
Also, if you rent your property for more than 14 days a year and do not meet personal use requirements, your earnings may be subject to U.S. income taxes.
Do You Need Insurance?
If your property is considered to be for commercial use, you need to have the right insurance coverage. There could be restrictions or limitations on your insurance coverage that a traditional homeowners policy does not cover. You should contact your insurance agent to ensure that you are protected in the event one of your guests damages your property.
Local Ordinances for Short-Term Rentals
Every county, city, town, and village has unique laws and guidelines on short-term rentals. Therefore, it's essential to be aware of the legal requirements in your area and understand that laws around this issue are constantly changing.
If you need assistance with listing your property for short-term rental use in Wisconsin, The Law Offices of Mark S. Knutson, S.C. is here to ensure that you are in compliance with state and local guidelines.
We're here to help protect your property rights. Contact our Waukesha County attorneys by calling us today at (262) 205-0705 if you need help navigating Wisconsins's short-term rental laws.