Massachusetts attracts millions of visitors each year, drawn to its rich colonial history, thriving academic institutions, and picturesque coastal towns. Short-term rentals have become a popular option for travelers seeking more personalized accommodations, and property owners across the state are tapping into platforms like Airbnb and Vrbo. While Massachusetts has passed notable legislation regulating short-term rentals at the state level, local municipalities also have authority to impose their own rules. This article walks you through the most important factors to keep in mind when establishing a short-term rental business in the Bay State, from registration requirements to local ordinances and taxes.
Massachusetts’s Definition of a Short-Term Rental
Unlike some states that leave short-term rental policies entirely to local governments, Massachusetts has enacted specific statewide legislation. Under Chapter 337 of the Acts of 2018, a “short-term rental” generally refers to an occupied property rented out for 31 days or less. The statewide law clarifies host obligations, taxes, and registration requirements, while giving individual towns and cities the freedom to enact additional regulations to suit local needs.
Starting a Short-Term Rental Business in Massachusetts
Running an Airbnb or similar rental in Massachusetts typically involves compliance at two levels:
- State-Level Requirements: Hosts must register their property with the Massachusetts Department of Revenue (DOR) and collect the required lodging taxes on stays of 31 days or fewer (unless the platform handles taxes for you).
- Local Rules: Municipalities can adopt their own ordinances pertaining to safety inspections, licensing, or caps on the number of short-term rentals in certain neighborhoods. Owners should confirm local laws through city or town websites or by contacting local officials.
Further, if you choose to operate under a legal business entity such as an LLC, register it with the Massachusetts Secretary of the Commonwealth. Check homeowners association (HOA) or condominium bylaws as well, as some developments restrict or prohibit short-term stays.
Short-Term Rental Licensing Requirement in Massachusetts
Massachusetts does not issue a single, universal “short-term rental license,” but the state law does require hosts to:
- Register the short-term rental with the DOR’s lodging platform.
- Obtain any necessary local license or permit: Some municipalities, such as Boston, require short-term rental operators to apply for a local certificate or permit, pass an inspection, and comply with specific occupancy limits.
Failure to comply can lead to monetary penalties, cease-and-desist orders, or other enforcement actions. Because Massachusetts law allows cities and towns to layer their own regulations on top of the state requirements, verifying local policies is essential.
Massachusetts Short-Term Rental Taxes
A key feature of Massachusetts’s short-term rental law is the imposition of a state excise tax on short-term stays, aligned with the traditional hotel and motel tax. The standard state tax rate on short-term rentals is currently 5.7% of the total rent. On top of that, hosts may face additional taxes:
- Local Option Tax: Cities and towns can add up to 6% in local excise tax (some do up to 6.5% for Boston).
- Cape Cod and Islands Water Protection Fund Tax: An additional 2.75% levy may apply to rentals in Cape Cod, Martha’s Vineyard, and Nantucket to support water infrastructure projects.
Hosts who list on platforms like Airbnb should confirm whether the platform automatically collects and remits these taxes. If not, you must register with the Massachusetts DOR, file returns, and remit the appropriate amounts. Maintaining thorough records of rental income, cleaning fees, and other charges is vital to ensure accurate tax reporting.
Vacation Rental Tax Deductions
In Massachusetts, short-term rental hosts can still take advantage of federal tax deductions if they rent out their property for more than 14 days a year, subject to IRS guidelines. Deductible expenses often include mortgage interest, property taxes, insurance, utilities, maintenance, and depreciation. Tracking the precise number of days rented, along with detailed expense records, is essential for accurate deductions. Consult a tax advisor or review IRS publications to ensure your rental’s specific circumstances meet all requirements.
Short-Term Rental Regulations by Major Locations in Massachusetts
Boston
Boston enforces a robust short-term rental ordinance with specific eligibility criteria for each property type. Generally, owners must:
- Register with the city through its Short-Term Rental Registration portal.
- Obtain an Inspection ensuring compliance with safety standards.
- Observe Occupancy Limits and restrictions on which types of units qualify (e.g., some must be owner-occupied).
Additionally, Boston imposes a local excise tax that stacks with the state excise tax, potentially raising the overall tax rate above 11%. Noncompliance can result in fines or revocation of rental privileges.
Cambridge
Cambridge, home to Harvard and MIT, sees consistent demand for short-term rentals. The city requires hosts to comply with the state registration rules and collect lodging taxes. Although Cambridge does not have a separate Airbnb ordinance as strict as Boston’s, it does apply standard zoning laws and building regulations. Property owners who rent out a spare room versus an entire apartment or condo may encounter different rules, so consult local guidelines for clarity.
Salem
Salem’s tourism peaks in October due to its famous Halloween-themed attractions. This seasonality drives a strong short-term rental market. The city does not require a special STR license beyond what the state mandates, but it enforces local lodging tax collection. Hosts should be mindful of noise and trash ordinances, especially during high-traffic periods. Reviewing Salem’s municipal code for short-term rental updates is prudent, given the city’s evolving tourist demands.
Cape Cod, Martha’s Vineyard, and Nantucket
These coastal and island communities each handle short-term rentals uniquely. The common thread is the additional 2.75% water protection fund tax. Some towns have introduced:
- Rental Registration or inspection programs to ensure safety and manage the influx of tourists.
- Parking and Trash Restrictions, especially in summer months, to ease congestion.
With a substantial tourist economy, enforcement of the short-term rental law tends to be strict in these areas. Carefully monitoring local announcements is crucial if you host in these popular vacation destinations.
Worcester
Massachusetts’s second-largest city, Worcester, has seen a rise in short-term rentals as part of its ongoing economic revitalization. While no specialized STR ordinance is in place at the time of writing, hosts must still comply with state registration rules, lodge excise tax, and local business regulations. Worcester also maintains standard nuisance and occupancy rules that can affect nightly rentals in residential areas.
Takeaway
Massachusetts stands out for having a well-defined state framework on short-term rentals, including a mandatory registration process and a lodging tax structure covering stays of 31 days or less. However, each municipality can layer additional rules, such as licensing and occupancy limits, making compliance a two-tier process. Collecting the state excise tax—and any local surcharges—accurately is a key obligation, unless your listing platform automatically remits them on your behalf.
Hosts should keep up with city or town council notices for updates that could impact short-term rental operations. Through careful adherence to state regulations, local ordinances, and robust tax record-keeping, property owners can thrive in Massachusetts’s booming short-term rental market and offer guests a comfortable, compliant stay in the Bay State.
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