Letter: STRs have a really good deal with potential tax breaks
This past summer there have been numerous articles and letters to the editor on the subject of STRs and the proposed STR tax. Most of the letters run along the same line. Any STR restriction or STR tax is bad. One letter stated an STR tax would drive visitors away and that the city could expect to go bankrupt. If all the STRs in Steamboat closed their doors today, the city most likely would have to review its spending and make a few cuts or adjustments, but to go bankrupt? No way.
The city would go bankrupt if businesses had to close their doors because employees are unable to find affordable housing and no one wants to work here.
Then there was another letter reminding us that second home owners spend money in the community supporting businesses and that the owner had to pay additional money over what was received from renting the property for repairs and upgrades.
What needs to be remembered is that an STR is a business and as such receives tax breaks on their federal and state income taxes, which non-STR property owners are not allowed. There are breaks like deducting all or partial cost for insurance, utilities, HOA fees, management fees, repairs and maintenance, property taxes and mortgage interest to name a few, and then there is the paper deduction known as depreciation.
All of these and others are allowed to be deducted from gross rental income to determine taxable income. If the total of all these expenses equals or exceeds the income, it’s possible for no income tax liability to be incurred. Such a good deal.
Many STR owners have someone else paying all or a portion of the operating cost on the property, whereas a non-STR property owner has to pay those costs out of after-tax income, and they can forget about any tax deduction on mortgage interest payments or get to deduct depreciation.
One person gave advise their father had given, “If you can’t afford it, you don’t buy it.” If a tax on STR causes someone to not rent a property, there are solutions. Lower the rent, or include the tax in the rent charged, then back it out and pay the city and try for another tax-deductible expense. A vote on an STR tax is on the ballot in November. Just get out and vote one way or the other.
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