If You Frequently Rent Your House, Should You be Taxed More?

That’s a question being pondered by Cook County when it comes to second homes, or cabins, located there, according to today’s Star Tribune. Here are a few extracts:

While properties in Minnesota fall into one of dozens of classifications for tax purposes, some assessors say there is no clear category for rented-out vacation homes.  Officials in the Cook County seat of Grand Marais scoured websites recently and found that a full 10 percent of the county’s taxable parcels were listed on vacation rental websites.

People who live elsewhere have for decades owned vacation properties around the Gunflint Trail and the rocky North Shore of Lake Superior. Many are family cabins, some of which have been rented out periodically. Others are individually owned, condo-style properties managed by resorts.

But, more recently, some property owners seem to be placing multiple stand-alone properties into the short-term rental market full time. For example, along one shoreline-hugging road, a small company from Kansas bought four houses or cabins over the past few years. Three have been renovated and are now offered on websites for upward of $345 a night. A vacation rental website shows them as mostly booked for the summer.

The cabins sold for handsome prices and as per state rules, assessors used those sale prices to determine taxable value on comparable properties nearby. That in turn led to local homeowners seeing their taxes go up much more than what their homes should be valued at. Hence the discussion on whether to tax rented-cabin properties more—but at what point: what percentage of months can a cabin be rented before it becomes a higher-tax classification?

Minnesota already has one of the most complicated property tax systems in the country, with dozens of classifications compared with just a handful in some states. Adding a new class isn’t a popular idea. But finding the right designation is a question of fairness, assessors say. See the Star Tribune article for more details.