A new state law allows owners to rent their homes for 72 days each year, while still paying the lower tax rate applied to owner-occupied property.
Local officials and rental companies say the law allows owners to rent their homes during tourist-heavy summer months, giving them money to help pay rising insurance and tax bills.
Previously, owners could rent their homes out only 14 days a year without getting bumped up to the 6 percent property-tax rate applied to second homes and rental properties. The owner-occupied rate is 4 percent.
“The new law may open up possibilities for people that haven’t rented before because of that (previous) rule,” said Bill Haley, vice president of marketing for Resort Rentals of Hilton Head Island. “Now they may be willing to look at renting as more worthwhile to make some extra income.”
The Senate passed the bill May 29, and the S.C. House of Representatives did so Tuesday. Gov. Nikki Haley signed it Thursday.
The law applies to all properties in South Carolina, but Haley and others believe its most significant impact will be in coastal areas such as Beaufort County and other tourist spots.
The state’s economic analysis of the bill found the new rule could cost local governments — primarily school districts — about $1 million each per year in property-tax revenue because some properties will shift to the lower tax assessment. Those who pay at the 4 percent, owner-occupied rate aren’t taxed for school operations.
However, Haley said it is more likely that those taking advantage of the law will be people already paying the 4 percent rate and who want additional income.
The Beaufort County Assessor’s Office has not studied how the law might affect county revenue, but it is prepared to enforce it, according to Assessor Ed Hughes.
“We have been dealing with the rental scenarios for a while now,” Hughes said, “and this is a number change, not a principle change.”
Previous attempts to pass similar bills — with limits of around 90 to 100 days — have failed, and amendments whittled the new law down to 72 days, Hughes said.
Hughes notes that 72 days is just short of a full summer, so an owner can’t rent out a home for the entire season, plus spring break and winter holidays, and still get the tax break.
The state’s previous 14-day limit was upheld by an S.C. Court of Appeals decision in 2012 against Leslie and Gregory Ford, a Hilton Head Island couple who earned $76,500 by renting out their home for 91 days in 2008 while still claiming it as their primary residence.
The couple said the law was intended to make sure people paid accommodations taxes on homes rented longer than 14 days, which they had. However, Beaufort County responded that the extended renting made the property a second home that should have been taxed at the 6 percent rate, and the courts agreed. In April, the S.C. Supreme Court declined to review the appellate court’s ruling.
The (Charleston) Post & Courier reporter David Slade contributed to this report. Follow reporter Zach Murdock at twitter.com/IPBG_Zach.