Colorado Airbnb and Short Term Rental Regulations (2024 Update)

In recent years, the State of Colorado has been one of the most attractive and most profitable locations to invest in Airbnb across the US. The hot springs, the Rocky Mountain National Park, the endless natural attractions, the beautiful landscapes, and the art and music scene are just some factors that have contributed to this status.

However, the expansive growth of the Colorado Airbnb industry led to an inevitable housing crisis. Local legislators had to respond to this challenge and started adopting various regulations on vacation rentals across the state.

While there are no state-wide Colorado short-term rental laws, the rules at the county and city level are frequently some of the strictest in the US. 

If you're interested in turning your property into a short-term rental, but you're not sure if it's legal under Airbnb regulations, Awning can help. As a nationwide property management company, we are well-versed in the laws and regulations surrounding short-term rentals. Contact an Awning agent today and let us help you determine if your property qualifies. Call or text 415-941-5206

Colorado’s Definition of a Short Term Rental

The State of Colorado does not have an official unified definition of a short-term rental property. According to a bill introduced in 2020 but not yet signed, a Colorado short-term rental unit would be a building or a portion of a building that is designed as a place of residency but that is leased or made available for lease for short-term stays and is occupied by the owner for less than 30 days in a year. A short-term stay, meanwhile, would be classified as overnight lodging for less than 30 consecutive days for a monetary payment.

Under this proposed definition, they exclude short-term rentals from the residential improvements category.

Starting a Short-Term Rental Business in Colorado

To start a vacation rental business in Colorado, property owners do not need to apply for any state-level permits or licenses. A general requirement - not pertinent to short-term rentals only is to register your business with the Colorado Secretary of State. You can do that online. The process requires a small fee, in the $20-$50 range.

Next, you need to get a federal employer identification number (EIN) if you want to form an LLC or corporation. However, you don’t need this if you form a sole proprietorship. You can apply online through the IRS website.

Colorado has a sales tax license that is valid for two years. You need to apply through the Colorado Department of Revenue. According to the Colorado short-term rental laws, sales tax has to be paid both at the state and at the local level.

Short-Term Rental Licensing Requirement in Colorado

The State of Colorado does not impose any state-wide vacation rental licensing or permitting requirements. However, the state authorities realized the need to control the short-term rental industry in order to ease the housing and economic crisis in the top tourist locations across the state.

As a result, in March 2020 the Colorado General Assembly signed an act which allows a board of county commissioners to license and regulate owners and owner agents who rent or advertise lodging units for short-term stays. The board can fix relevant fees, terms, and issue rules for how hosts get and maintain licenses.

This makes the Colorado Airbnb regulations similar to the Texas and California short-term rental laws. All these states have opted for minimal state-level rules, leaving jurisdiction in the hands of local authorities in order to accommodate the specific situation within their county or city.

License Renewals for Short Term Rentals in Colorado

Since Colorado does not require short-term rental licenses and permits, there is no need to renew such documents.

Colorado Airbnb hosts need to keep in mind that Colorado sales tax licenses are valid for two years. They need to be renewed afterwards in order to continue paying sales tax and keep your vacation rental business legal.

Required Documents for Colorado Short Term Rentals

There are no specific documents that Colorado short-term rental owners need to present to the state. The only documents needed are those related to registering a business, getting an EIN (if applicable), and getting a sales tax license. The documentation varies though, depending on the type of business, so Airbnb hosts need to check what applies to their particular situation.

Counties and cities have enacted their own short-term rental laws which ask for unique documents in order to get a license or a permit. We will discuss those shortly.

Colorado Short Term Rental Taxes

Similar to most states, Colorado requires vacation rental property owners to pay a few different taxes.

Here are the taxes that Colorado short-term rental investors need to cover:

• Colorado Sales Tax at a rate of 2.9%
• Local Sales Tax at a rate of 1% to 5%, set by the county and the city
• County Lodging Tax at a typical rate ranging between 0.9% and 2%, varying by county
• Local Marketing District Tax at a rate of 1.4% to 4%
• Metropolitan District Tax at a rate in a typical range of 0.5% to 5.5%, depending on the district

It’s noteworthy that investors pay these taxes on the vacation rental listing price including cleaning fees and other relevant fees.

Importantly, if you rent out your investment property through a short-term rental online marketplace that collects and remits taxes on behalf of owners, you won’t need to worry about some of these. However, you need to check with your selected platform - Airbnb, Vrbo, or others - whether they provide this service in the State of Colorado.

Colorado Vacation Rental Tax Deductions

According to federal laws, if you rent out a second home for over 14 days in a calendar year and use it for personal purposes for up to 14 days in a calendar year, you qualify for vacation rental tax benefits. As a Colorado Airbnb host, you need to take advantage of all available deductions to minimize expenses while optimizing cash flow and Airbnb profit margins.

The following are business expenses which Colorado short-term rental property investors can deduct:

• Mortgage interest
• Mortgage insurance premium
• Property tax and other taxes
• Depreciation
• Maintenance
• Utilities
• Supplies
• Cleaning, accounting, legal, and other business services
• Travel costs
• Home office expenses

Statewide Short-Term Rental Rules in Colorado

Colorado has joined most states by not regulating the vacation rental industry at the state level. The only notable exception is Florida. However, most Colorado tourist destinations have adopted their own short-term rental laws to protect residents. 

Short Term Rental Rules by Colorado City

Savvy real estate investors understand that it’s important to know not only the state-level vacation rental laws but also the county- and city-level regulations before investing in a location. Thus, we’ve put together the requirements in the seven most visited Colorado areas, to help beginner and remote investors get started on the right foot.

1. Adams County, Colorado Short Term Rental Laws

Adams County is one of the few Colorado markets that do not have any short-term rental laws and regulations. There have been no talks or discussions on introducing such rules in the future.

This means that both owner-occupied and non-owner occupied vacation rentals are legal in Adams County as local laws do not expressly prohibit them. This makes Adam County an ideal location for investing in the Airbnb strategy in Colorado, where many markets face major restrictions for out-of-state and full-time investors.

In Adams County the local sales tax rate is 0.75%, while the lodging tax rate is 5%.

2. Arvada Short, Colorado Term Rental Laws

In August 2020, the City of Arvada passed an ordinance that legalized short-term rental properties which were previously banned. Arvada, CO law defines a short-term rental as a dwelling, part of a dwelling, or an accessory dwelling unit that is rented to transient guests for less than 30 consecutive days.

To operate a vacation rental business in Arvada, a short-term rental license and a business license are required. Investors can rent out a vacation rental only 240 days per year. Only one reservation is allowed per property per night, so you cannot host different unrelated guests at the same time. However, an owner can own up to three short-term rentals within the City, which makes Arvada a good place for investors who consider growing their portfolios to include multiple Airbnb properties in a single market.

Applying for an Arvada, Colorado short-term rental license requires:

• Property address
• Written authorization of the property owner if you’re not the property owner
• Local contact person’s name and phone number
• Site plan or floor plan
• Indication that one additional off-street parking space is provided unless applying for a full house or an accessory dwelling unit
• Indication that an operational smoke detector, carbon monoxide detector, and fire extinguisher are provided
• Ensuring the provision of a brochure detailing ordinances, rules, and regulations within the property
• Ensuring the provision of a brochure detailing the local contact’s information and other relevant property information
• Acknowledgement of meeting all local requirements

Licenses are valid for one year and need to be renewed.

The city-level sales tax is 3.46% and lodging tax is 2%.

3. Boulder, Colorado Short Term Rental Laws

The City of Boulder defines short-term rentals as properties that are rented out for up to 29 consecutive days. Investors can only advertise and operate a short-term rental after receiving a short-term rental license.

Boulder short-term rentals are only allowed in the principal residence of the license applicant that can be a natural person, a trust, or a not-for-profit corporation. A principal residence is considered a dwelling unit where a person lives for more than half of the year. There are strict maximum occupancy limits which investors must meet.

Applications for short term rental licenses in Boulder, Colorado should include:

• Applicant’s Colorado driver’s license or ID card
• Sworn statement that the property is the applicant’s principal residence
• Certification that the property is equipped with operational smoke detectors, carbon monoxide detectors, and other required safety equipment
• Two contacts’ names and phone numbers
• Rental license fee of $190 and business license fee of $25

After obtaining a license, a short term annual affidavit form needs to be submitted each year, along with a $20 fee. Meanwhile, licenses are valid for four years and need to be renewed. Importantly, Boulder short-term rental licenses are not transferable.

Besides the Colorado sales tax, Boulder vacation rental properties are subject to 0.99% county sales tax and 3.86% city sales tax. 

The Boulder, Colorado short-term rental laws essentially mean that non-owner occupied Airbnb properties are not legal in the city. This makes Boulder a suboptimal market for remote real estate investors interested in the vacation rental strategy.

4. Colorado Springs, Colorado Short Term Rental Laws

At the end of 2019, the City of Colorado Springs adopted the current version of the local short-term rental ordinance. According to the ordinance, there are two types of Colorado Springs short-term rental properties:

• Owner occupied short term rentals are defined as properties physically occupied by the owner for a minimum of 185 days in a calendar year. They are allowed in lawful dwelling units in zones where residential units are permitted.
• Non-owner occupied short-term rentals are defined as everything else. They are prohibited in single family zoning districts for anyone that applies after the ordinance passed. They have to be at least 500 feet from another short-term rental property in all other zoning districts.

There is no limit on the number of owner occupied vacation rentals, but there are regulations related to non-owner-occupied properties.

To apply for a license, Colorado Springs Airbnb hosts need to submit:

• An application
• Notarized affidavit
• Two forms of proof of residence
• Rental listing
• Property insurance

Short-term rental licenses are valid for one year in Colorado Springs, and the application fee is $119. Colorado Springs vacation rental owners must also ensure they have a valid business license.

The relevant taxes to be paid by Colorado Springs vacation rental owners include a county sales tax of 1.23%, a city sales tax of 3.12%, and a city lodging tax of 2%.

While they face zoning restrictions, investing in non-owner occupied short-term rentals is workable in Colorado Springs. Considering the strong demand from tourists, investors can find profitable opportunities for this strategy as long as they choose their location carefully.

5. Denver, Colorado Short Term Rental Laws

The City of Denver defines a short-term rental as the provision of lodging accommodations to guests for less than 30 consecutive days, in exchange for remuneration. Importantly, only primary residences can operate as Denver short-term rentals. A primary residence refers to the place where an owner’s habitation is fixed and to the owner’s usual place of return. A person can have only one primary residence.

Operating a Denver Airbnb business requires a license.

The documents needed to apply for a license include:

• Colorado driver’s license or ID card
• Two documents proving primary residence
• Proof of possession of the property
• Valid city lodger’s tax account number
• Application fee of $100

Short-term rental licenses are to be renewed annually in Denver, Colorado for a fee of $100.

Denver Airbnb hosts need to pay a city sales tax of 4.81% as well as a city lodger’s tax of 10.75%.

The Denver short-term rental laws make it one of the most restrictive Colorado markets for investing in vacation rentals. The law prohibits non-owner occupied Airbnb rentals, so full-time and remote investors cannot invest there.

6. Douglas County, Colorado Short Term Rental Laws

Currently renting out properties or parts of properties for less than 30 days is virtually illegal in Douglas County. While there are rare exceptions, Douglas County short-term rentals are not a viable option for investors.

However, recently there has been a debate about whether this type of rentals should be allowed in incorporated areas in order to bring financial benefits to local homeowners and local authorities (as tax revenue). Local governments have not taken concrete steps toward making vacation rentals legal in Douglas County, CO.

If you think you can find profitable Airbnb opportunities in Douglas County, we recommend you monitor potential changes in the local legislation.

7. Fort Collins, Colorado Short Term Rental Laws

The City of Fort Collins allows short-term rentals in single-family dwellings only. This property type includes townhomes, also known as single family attached homes, and excludes apartments, condos, and other multi-family buildings. A single family home needs to have extra firewall protection at the property lines and the roof area. Fort Collins short-term rentals are also allowed in R-1 hotel/motel occupancies, but these need to meet many fire, life, and safety core requirements.

There are two types of short-term rentals in the city:

• Primary: The owner occupies primary short-term rentals for a minimum of nine months a year and have a part of the dwelling unit rented out for less than 30 days. They are allowed in the green and yellow areas here.
• Non-primary: The owner does not occupy the short-term rental and rents it out in its entirety. They are allowed in the yellow areas only.

Many zoning districts prohibit Fort Collins, Colorado short-term rentals altogether.

Running a Fort Collins Airbnb business requires a short-term rental license and a sales and lodging tax license. It’s important to note that only a property owner can operate a vacation rental. Also, you can only rent to one party at a time.

To apply for a short-term rental license, you need to submit:

• Short term rental application
• Proof of personal liability coverage, i.e., homeowner’s insurance
• Document proving primary residence (for primary STRs only)
• Signed STR license annual affidavit (for primary STRs only)
• Proof of ownership
• Self-inspection checklist
• Photos of the rental space
• License fee of $150

Fort Collins STR licenses need to be renewed annually, for a fee of $100.

Local Airbnb hosts have to pay a 3.85% city sales tax and a 3% city lodging tax. Taxes are filed monthly, quarterly, or annually, depending on the amount of sales per month.

Investing in a vacation rental in Fort Collins can be an excellent opportunity, but investors need to choose the location carefully to make sure that non-owner occupied short-term rentals are legal.

Takeaway

The State of Colorado is a good place to buy a vacation rental property. Airbnb demand is strong, and daily rates are high. However, Colorado short-term rental laws by city vary widely, with some being very restrictive and even prohibitive. Thus, check out the local legislation diligently and maybe even talk to a local vacation rental manager before deciding on the best place to run an Airbnb business in Colorado. As an investor, eventually it is your responsibility to make sure that your rental complies with all requirements and regulations.

If you're interested in turning your property into a short-term rental, but you're not sure if it's legal under Airbnb regulations, Awning can help. As a nationwide property management company, we are well-versed in the laws and regulations surrounding short-term rentals. Contact an Awning agent today and let us help you determine if your property qualifies. Call or text 415-941-5206