Tax Regulations for Minnesota Vacation Home Rental Property

Individual Income Tax

For individual income tax purposes, Minnesota follows federal income tax laws in regards to rental properties. Income reported on your federal income tax return flows through to your Minnesota income tax return. For more information, refer to the Internal Revenue Service website at www.irs.gov. Refer to IRS Publication 17 and the Rental Income and Expense section. For federal income tax questions, call the Internal Revenue Service at 1-800-829-1040.

For a nonresident with income from a rental property in Minnesota, the income would be reported on Schedule M1NR, Nonresidents/Part-Year Residents.

For Minnesota income tax questions, call 651-296-3781 or 1-800-652-9094 or send an email to indinctax@state.mn.us

Sales and Use Tax

For Minnesota sales and use tax purposes, charges to lease or rent a residential dwelling, including a home, cabin, condominium or similar building are taxable for a period of less than 30 days and for periods of 30 days or more if there is no enforceable written lease agreement with the customer that requires the guest to give prior notice of their intention to terminate.

Rentals of a residential dwelling are not taxable if:

• the rental period is 30 days or more, and
• there is an enforceable written agreement requiring either the lessee or lessor to give notice before terminating the agreement.

Isolated and occasional sales exemption

Individuals are not required to register to collect sales tax if they are not considered to be in the business of renting or leasing their home or similar building. An individual is considered to be in the business by any of the following:

• the dwelling is licensed or required to be licensed; or
• the dwelling is leased or rented for a period of 15 days or more in a calendar year; or
• the rental or lease of the dwelling is advertised or otherwise offered to the public; or

Local taxes

If the rental property is located in an area with a local tax, the lease or rental is also subject to local sales and use taxes. In addition to the general sales and local taxes, city lodging taxes may also apply. The Department of Revenue administers city lodging taxes for Minneapolis, St. Paul and Rochester. Some cities and localities administer their own lodging tax, for information regarding lodging taxes for other cities, contact each city directly.

You may register for a Minnesota ID number online at: www.taxes.state.mn.us or by calling 651-282-5225 or toll-free 1-800-657-3605. The Application for Business Registration, Form ABR, is available on our web site or by writing: Minnesota Tax Forms, Mail Station 1421, St. Paul, MN 55146-1421.

Under the Sales and Use Tax section of the Minnesota Department of Revenue website, http://www.taxes.state.mn.us/taxes/sales/index.shtml, you may find the following information of interest:

• Sales and Use Tax Instruction Booklet
• Fact Sheet 170, A Step-by-Step Guide to Filing and Paying Sales and Use Tax Electronically
• Fact Sheet 164, Local Sales and Use Taxes
• Fact Sheet 123, Athletic Facilities, Recreational Areas, Resorts and Campgrounds
• Fact Sheet 164S, Special Local Taxes Minneapolis, Rochester, St. Cloud, St. Paul

Contact: 651-296-6181 or 1-800-657-3777;
salesuse.tax@state.mn.us

References:

M. S. 297A.61, Subd. 3(g)(2) Lodging

M. S. 297A.67, Subd. 23 Occasional Sales

M.S. 297A.61, Subd 21 Normal Course of Business

Property Tax

For property tax purposes, the occasional short term rental of a residential homestead or a seasonal recreational (SRR) property may not change the classification of that property. However, you should contact your county assessor to be sure.