New Jersey vacation rental tax guide
Avalara free tax guides
Airbnb and HomeAway/Vrbo have changed the way vacationers travel. More and more guests are choosing to rent private homes rather than book hotels. With a bounty of popular destinations including Atlantic City and the Jersey Shore, the Garden State offers prospective short-term rental hosts the opportunity to bring in extra income and meet new people.
But new income opportunities bring new tax implications. Like hotel and B&B stays, short-term rentals in New Jersey are subject to tax. Tax authorities require short-term vacation rental hosts to collect applicable short-term rental taxes from their guests and remit them to the proper authorities.
Failure to comply with state and local tax laws can result in fines and interest penalties. These may not catch up with vacation rental operators in the short term, but the sharing economy is under increased scrutiny so it’s important to address compliance before tax authorities address it for you.
Avalara MyLodgeTax has put together this guide to help you comply with New Jersey short-term rental tax laws. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.
No short-term vacation rental tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your vacation rental questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with New Jersey tax laws.
Short-term rental tax basics
When you start operating a short-term rental, while you might not have experience with lodging taxes, you’re probably familiar with income tax. It’s important to understand the difference between the two.
Income tax is reported and paid annually to the federal government and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.
Lodging tax on a short-term rental is a percentage of the cost of your guest’s stay that’s added to the price on the bill. The guest pays the tax, but you’re responsible for collecting the tax and paying it to the proper tax authority.
What's the definition of “short-term rental” in New Jersey?
For tax purposes, short-term rentals in New Jersey are defined as reservations of fewer than 90 days.
Who’s required to collect and file taxes on short-term rentals in New Jersey?
If you rent out a room, apartment, house, or other dwelling for fewer than 90 days at a time, you may be responsible for collecting, filing, and remitting short-term rental taxes to New Jersey authorities.
You have no lodging tax obligation if:
- You rent on a marketplace that collects payment for you, in which case the marketplace is responsible for the tax.
- You rent a private residential property and a licensed real estate agent handles your rental operations.
- You have up to two rental units and you deal with guests directly rather than via intermediaries such as Vrbo or Airbnb.
Location is key to compliance
The location of your rental is a crucial piece of information for short-term rental tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.
Use our lodging tax lookup tool to get a rate report specific to your New Jersey rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.
Registering with tax authorities
Before you can begin collecting taxes on your short-term rental in New Jersey, you’re legally required to register with the New Jersey Division of Taxation at least 15 days before you start business. You can register online, and once you’ve registered, you’ll receive instructions on filing your lodging taxes.
Depending on your jurisdiction, you may be required to register with your local tax authority and file local occupation tax returns in addition to state registration and filing.
Do I need to form an LLC?
In New Jersey, you don't need to form an LLC to register with tax authorities.
Local short-term rental regulations
Short-term rental operators in New Jersey should be aware of the regulations that apply to them, including local rules covering:
- Permits, licenses, and registration
- Neighborhood notification
- Building and housing standards
Homeowner Associations (HOAs) located in New Jersey may also have specific rules regarding vacation rentals. As a member, it’s your responsibility to be aware of the association’s policy. It’s important to review this information to understand any restrictions or limitations on short-term vacation rentals.
Other regulations associated with leases/subletting or condo/co-op rules may apply to your situation. A good place to start is by reviewing your signed lease and speaking with your landlord or property manager.
Collecting short-term rental tax
Once you’ve registered with tax authorities, you’re ready to start collecting rental tax, which you’ll add to your guest’s bill when they pay for their stay.
Which taxes apply to New Jersey short-term rentals?
In New Jersey, a number of different lodging taxes may apply to your short-term rental, depending on your location. These can include:
|Tax name||File and remit to|
|State sales tax||New Jersey Division of Taxation|
|State Occupancy Fee||New Jersey Division of Taxation|
|Meadowlands Regional Hotel Use Assessment||New Jersey Division of Taxation|
|Municipal Occupancy Tax||New Jersey Division of Taxation|
|Sports and Entertainment Facility Tax (Millville)||New Jersey Division of Taxation|
|Atlantic City Luxury Tax||New Jersey Division of Taxation|
|Atlantic City Promotion Fee||New Jersey Division of Taxation|
|Cape May County Tourism Tax and Assessment||New Jersey Division of Taxation|
|Local hotel occupancy tax (Elizabeth, Newark, Jersey City)
||Local tax authority|
Before you can begin collecting short-term rental taxes, you need to know the correct rate to charge. Rates can and do change frequently, so it’s critical to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues.
Our lodging tax lookup tool can give you a rate report specific to your New Jersey address. The report includes the estimated total tax rate to collect from guests, required registrations, frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
What charges are taxable?
In New Jersey, anything that the host requires the guest to pay in order to use the accommodations is considered part of the rental fee. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc.
Fees that are refundable, such as damage deposits, are generally not subject to lodging taxes, even if the host keeps the deposit. The same is true for optional fees. For example, if the host charges guests fees for performing optional laundry services that they choose to use, or a fee for arranging dry cleaning for them, these most likely are not subject to lodging taxes.
What happens when my short-term rental marketplace (such as Airbnb or HomeAway/Vrbo) collects taxes for me?
Before collecting any short-term rental taxes from your guests, you need to be aware of whether your vacation rental marketplace collects New Jersey short-term rental taxes for you when the listing is booked. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities. Check with your platform for the latest information on which taxes they’re collecting on your behalf.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in New Jersey. For example, a guest who rents for a long term rather than a short term will be exempt from short-term lodging taxes.
In New Jersey, exempt organizations registered with the New Jersey Division of Taxation, state and federal agencies, the United Nations, and any other international organization of which the United States is a member are exempt from paying Sales Tax, State Occupancy Fees, and, if applicable, Municipal Occupancy Taxes, as long as the accommodation is paid for directly by the agency. In addition, certain exemptions are granted to qualified foreign diplomatic and consular personnel who reside in the United States.
Filing Short-term rental tax returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the New Jersey Division of Taxation. In New Jersey, you can file returns online. In order to file, you’ll need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due. The New Jersey Division of Taxation allows credit card payments, but you may be charged convenience fees for this type of payment.
Take the time to double-check your returns prior to submitting. Simple mistakes such as typos, missing signatures, and incorrect tax information can lead to unwanted delays.
When do I need to file my returns? When do I need to file my returns?
You’ll be assigned a filing frequency and due dates when you register with the tax authority. For filing with the New Jersey Division of Taxation, due dates are as follows:
|Filing frequency||Due date|
|Monthly||Due the 20th day of the month following the end of the filing period|
Due the 20th day of the month following the end of the filing period
I didn’t rent my property during this filing period. Am I still required to file a tax return for my short-term rental with the New Jersey Division of Taxation?
Yes. Short-term rental operators registered with the New Jersey Division of Taxation are required to file returns each assigned filing period, regardless of whether there was any short-term rental income or any short-term rental taxes were collected. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.
Are there penalties for filing taxes late? Are there penalties for filing taxes late?
Whether you choose to offer short-term rentals through a marketplace like Airbnb or directly to the consumer, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses not in compliance with tax laws. Failure to register with tax authorities and file short-term rental tax returns in New Jersey on time may result in late fees, interest payments, and in extreme cases, legal action.
I’ve been offering short-term rentals without collecting lodging tax. What options do I have?
If you’re already operating a short-term rental but you’re not collecting short-term rental taxes, you may be in violation of New Jersey tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.
Short-term rental hosts in New Jersey may be able to take advantage of a managed audit. A managed audit offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the New Jersey Division of Taxation. Managed audits are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.
Are there options for outsourcing lodgings tax filing?
Yes. Numerous short-term rental hosts in New Jersey file several state and local lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.