Kentucky Short Term Rental Laws: AirBnB & Vacation Rental Regulations

Kentucky, known for its rolling hills and historic landmarks, offers a vibrant short-term rental market. This guide delves into Kentucky's rental laws, providing insights into how state and local regulations shape the Airbnb experience.

Kentucky’s Definition of a Short Term Rental

In exploring the intricacies of short-term rental definitions and regulations, the state of Kentucky presents a unique case. This analysis delves into how Kentucky defines Airbnb and similar platforms, explores possible exceptions to these definitions, and compares Kentucky's stance with other major states across the U.S. Understanding these nuances is crucial for property owners, renters, and tourists alike.

In Kentucky, the Supreme Court has established that the use of real estate for short-term rentals through platforms like Airbnb is considered "commercial" rather than "residential" in nature​​. This distinction is pivotal in understanding the regulatory framework within the state. The common definition, aligned with many localities, is the rental of a dwelling unit for less than 30 consecutive days​​​​​​.

There are no explicit state-wide exceptions to this definition. However, local jurisdictions may have variations, so it's imperative to consult local ordinances for specific details. The lack of a standard statewide rental period highlights the importance of localized interpretation.

Kentucky's approach to defining and regulating short-term rentals, particularly Airbnb, is in line with a broader national trend of viewing these rentals as commercial entities. However, the state's regulations are nuanced and can vary at the local level. When compared to other states, Kentucky's stance is not singular; it shares common ground in terms of general definitions and the impact of local laws. This complexity underlines the need for property owners and renters to stay informed about the specific requirements in their area to navigate the evolving landscape of short-term rental regulations effectively.

Starting a Short Term Rental Business in Kentucky

Embarking on a short-term rental business in Kentucky, such as Airbnb, can be a lucrative venture. However, it's essential to navigate through various regulations, safety inspections, and paperwork to ensure a smooth start. This guide aims to provide you with detailed insights into these aspects, helping you establish a compliant and successful rental business.

Starting a new Airbnb in Kentucky involves several steps, tailored to specific local jurisdictions:

• Obtaining Permits and Licenses: Many counties and cities require hosts to obtain permits or licenses. For instance, Boone County mandates a valid Short-Term Rental (STR) Permit and compliance with zoning regulations​​.
• Adhering to Local Ordinances: Regulations can vary significantly. For example, in Bowling Green, short-term rentals are prohibited in single-family residential districts, unlike Bed and Breakfasts which can operate with a special permit​​.
• Registration: In Louisville, hosts must register their short-term rental property and maintain an active registration​​.
• Safety Standards Compliance: Properties must meet various safety regulations, including smoke and carbon monoxide detectors, emergency exits, and adherence to building codes​​.
• Housing Inspections: Some areas require initial housing inspections and recurring re-inspections for licensing purposes​​.
• Property Details and Contacts: Submit details of the property and emergency contacts​​.
• Proof of Insurance: Hosts need to provide proof of liability insurance, with some areas requiring a minimum coverage amount​​.
• Permit and License Fees: These can range from $25 to $500, varying by location​​.

For more information, hosts can contact:

• Local Government Offices: Information on specific local regulations and requirements.
• Airbnb Customer Service: For direct assistance, hosts can call Airbnb at +1-855-424-7262 or +1-415-800-5959. Additionally, they can use the 'Contact Us' link on the Airbnb website for chat support or reach out to @Airbnbhelp on Twitter​​​​.

Starting a short-term rental business in Kentucky requires careful attention to local regulations, safety inspections, paperwork, and associated fees. It's essential to stay informed and comply with the specific requirements of the area where your property is located. Utilize available resources such as local government offices and Airbnb's customer service for guidance. With proper preparation and compliance, you can set up a thriving Airbnb business in the Bluegrass State.

Required Documents for Kentucky Short Term Rentals

Navigating the requirements for short-term rentals in Kentucky can be complex, but understanding the necessary documents is crucial for compliance. This guide aims to simplify the process for prospective hosts.

Documents Required for License or Permission

• Zoning Compliance Permit: Required from the Division of Planning.
• Business License: Issued by the Division of Revenue.

Special Fees License: Also from the Division of Revenue, with an annual renewal. The fee is $200 for the first unit and $100 for each additional unit.
To apply for the Special Fees License, the following documents are needed:

• Completed application with an attached Excel document detailing the rental properties.
• Sworn affidavits by the applicant and the property owner (if different).
• Zoning Compliance Permit for each property.
• Site and floor plan of the rental property.
• Proof of general liability insurance (minimum $1 million).
• For properties with septic tanks, evidence of tank capacity.
• For Hosted Short-Term Rentals, two forms of residency proof.

Kentucky Short Term Rental Taxes

Kentucky, known for its rich history and vibrant culture, is also a popular destination for travelers seeking short-term rental accommodations. As a short-term rental operator, it's crucial to understand the tax implications of your business. This article provides a comprehensive guide to the taxes charged specifically to short-term rental operators in Kentucky, their interaction with state and federal taxes, comparisons with other major states, and insights into tax write-offs.

In Kentucky, short-term rental operators must navigate a combination of state and local taxes. These include:

• 6% State Sales Tax: Applied to short-term room rentals.
• 1% State Transient Room Tax: Charged on the rent for occupancy of rooms by hotels, motels, or similar businesses.
• Local Transient Room Taxes: Vary by location, for instance, Louisville charges an 8% transient room tax, Lexington 6%, Bowling Green 5%, and Paducah 5% for hotel/motel taxes​​​​​​​​​​.

Kentucky Short Term Rental Taxes and Federal Taxes

• Lodging vs. Income Tax: Lodging tax is a percentage of the cost of a guest's stay added to the bill, which the guest pays but the host collects and remits to the tax authority. Income tax is reported and paid annually on taxable income after expense deductions​​.
• Collection and Filing Requirements: Operators are responsible for collecting, filing, and remitting short-term rental taxes to Kentucky tax authorities unless they exclusively use platforms like Airbnb or Vrbo, which handle lodging taxes​​.
• Different Tax Authorities: State sales and transient room taxes are remitted to the Kentucky Department of Revenue, while local lodging taxes go to the respective local tax authority​​.
• Online Marketplaces Role: Platforms like Airbnb and Vrbo are required to collect and remit state and local lodging taxes in Kentucky, simplifying the process for hosts who exclusively use these services​​.

Operators can write off certain expenses related to their short-term rental business. These include:

• Rental Expenses: If renting out a second home for more than 14 days a year.
• Record Keeping: Maintaining detailed records of expenses, usage logs, digital receipts, financial logs, updates, and depreciable assets is crucial.
• Deductible Expenses: Must be ordinary, necessary, directly related to rental activity, reasonable in amount, and incurred during the tax year. Examples include cleaning fees, HOA fees, maintenance, utilities, and marketing services.
• Improvements vs. Repairs: Improvement expenses are deducted over their useful life, while repairs are typically written off in the year they occur​​.

Navigating the tax landscape for short-term rentals in Kentucky requires a blend of understanding state and local tax obligations, leveraging online marketplace facilities, and optimizing tax write-offs. By staying informed and meticulous in record-keeping, operators can effectively manage their tax responsibilities and potentially enhance the profitability of their rental businesses. Remember, tax laws can be complex and change over time, so consulting a tax professional is always advisable.

Short Term Rental Rules By Kentucky City

Louisville, Kentucky Short Term Rental Laws

• Specific AirBnB Rules: All short-term rental operators must register with the city and pay an annual fee.
• Area-Specific Restrictions: Short-term rentals not the primary residence must be at least 600 feet away from another short-term rental requiring a conditional permit. No more than 12 adult occupants are allowed at a time.
• Enforcement: The annual short-term rental registration fee increased to $250, partially to fund a position dedicated to monitoring short-term rentals.
• Grandfathered Rules: Not specified.
• Other Rules/Fees/Taxes: A license registration number must be posted alongside any advertisement on hosting platforms like Airbnb or VRBO.

Lexington, Kentucky Short Term Rental Laws

• Specific AirBnB Rules: STR operators must obtain Zoning Compliance, Business License, and Special Fees License.
• Area-Specific Restrictions: Short-term rentals have specific requirements for smoke detectors, carbon monoxide detectors, fire extinguishers, and emergency rescue openings. No outdoor signage identifying the unit as a short-term rental.
• Enforcement: Advertisements must include the rental’s Local Registration Number and specify the maximum number of occupants.
• Grandfathered Rules: Operators active before the updates have until Jan. 11, 2024, to comply with the new rules without needing a conditional use permit.
• Other Rules/Fees/Taxes: Special Fees License at $200 for the first unit and $100 per additional unit.

Bowling Green, Kentucky Short Term Rental Laws

• Specific AirBnB Rules: Short-term rentals listed online must display their license number in the listing.
• Area-Specific Restrictions: Prohibition of short-term rentals in certain districts.
• Enforcement: Revision of the procedure in permitting.
• Grandfathered Rules: Not specified.
• Other Rules/Fees/Taxes: Not specified.

Owensboro, Kentucky Short Term Rental Laws

• Specific AirBnB Rules: Not specified.
• Area-Specific Restrictions: Not specified.
• Enforcement: Not specified.
• Grandfathered Rules: Not specified.
• Other Rules/Fees/Taxes: 5% hotel occupancy tax.

Covington, Kentucky Short Term Rental Laws

• Specific AirBnB Rules: Short-term rentals require individual approval as a "conditional use."
• Area-Specific Restrictions: Six-month moratorium on licensing of short-term rental properties.
• Enforcement: Short-term rentals were regulated starting in 2020, requiring a rental license and zoning approval.
• Grandfathered Rules: Not specified.
• Other Rules/Fees/Taxes: Not specified.

Kentucky's cities have diverse and specific rules governing short-term rentals, with each city implementing measures tailored to its needs. These rules are enforced at the city level and often require operators to adhere to licensing, safety standards, and advertising regulations. Understanding these rules is essential for both operators and guests to ensure compliance and a successful rental experience.

Takeaway

In Kentucky's evolving rental market, understanding the balance between state-wide guidelines and local ordinances is crucial for hosts and investors seeking to tap into this dynamic sector.