Michigan’s striking Great Lakes coastline, rich automotive history, and abundance of outdoor recreation have made it a popular destination for vacationers and business travelers alike. Short-term rentals in the state—offered through platforms like Airbnb and Vrbo—can be a lucrative opportunity for property owners, yet no single Michigan law governs their operation. Instead, local regulations and state-level tax obligations shape the short-term rental landscape. This article explores what you need to know about listing a short-term rental in the Great Lakes State, from licensing considerations to city-specific rules and taxes.
Michigan’s Definition of a Short-Term Rental
Michigan does not provide a unified, statewide definition of “short-term rental,” leaving municipalities and counties to determine whether a stay under 30 days (or another time threshold) counts as transient lodging. While the state generally recognizes that a property rented for fewer than 30 days may require lodging tax collection, local zoning laws vary widely. As a result, prospective hosts should confirm each municipality’s definition of short-term rentals before offering their property to guests.
Starting a Short-Term Rental Business in Michigan
Before listing your Michigan property on short-term rental platforms, you should:
- Determine Local Requirements: Check municipal and county websites for any rules governing vacation rentals. Some areas require a general business license, while others have implemented short-term rental permits or annual inspections.
- Register for State Taxes: If the booking platform doesn’t handle it automatically, you may need to register with the Michigan Department of Treasury to collect and remit state use taxes on short-term stays.
- Verify Zoning and HOA Rules: Neighborhood or homeowners association guidelines can limit or prohibit transient rentals, so confirm you’re allowed to operate in your property’s location.
Some property owners also set up a legal business entity (LLC or similar) for liability protection, but it’s not strictly required unless mandated by local regulations.
Short-Term Rental Licensing Requirement in Michigan
Michigan does not have a dedicated, statewide short-term rental license. Instead, local governments often decide whether to issue a special permit or rely on existing ordinances for transient lodging. For example:
- Resort towns near the Great Lakes might adopt stricter caps or require health and safety inspections to preserve neighborhood character.
- Rural counties sometimes have minimal restrictions, focusing primarily on ensuring owners collect the correct taxes.
- Metro areas like Detroit and Grand Rapids may have local licensing processes, although these can change in response to housing availability and public feedback.
Failing to meet local requirements can result in fines or forced closure, so reading up on city council minutes, zoning ordinances, or reaching out to city hall is crucial.
Michigan Short-Term Rental Taxes
Short-term rental hosts in Michigan often encounter multiple taxation layers:
- State Use Tax: Michigan applies a 6% use tax on most rentals of under 30 days. If your platform doesn’t remit it, you must register and file through the Michigan Department of Treasury.
- Local Assessments: Certain cities impose additional hotel or transient lodging taxes. While not as prevalent as in some states, these do exist in high-tourism areas or where local authorities elect to levy them.
- Tourist or Convention Taxes: In select counties or zones that rely on tourism, local boards or authorities might adopt a lodging surcharge to fund events or attract visitors.
Maintaining thorough records of nightly rates, fees, and occupancy dates helps ensure accurate filing. Late or missing remittances may trigger penalties and interest charges.
Vacation Rental Tax Deductions
Michigan hosts, like others in the U.S., can often claim federal tax deductions on short-term rental expenses if they rent out a property for more than 14 days a year. These include:
- Mortgage interest
- Property taxes
- Insurance
- Utilities
- Maintenance and repairs
- Depreciation of the property and furnishings
Track the exact number of rental days and differentiate personal use from rental use to maximize eligible deductions. Consulting a qualified tax advisor helps you stay aligned with the latest IRS rules and ensures accurate reporting.
Short-Term Rental Regulations by Major Locations in Michigan
Detroit
Detroit does not currently ban short-term rentals, but hosts need to check city rules for lodging and safety codes. Depending on the nature of the rental (room in your primary home vs. entire property), you may need a rental registration or certificate of compliance with local housing standards. Collecting the 6% state use tax remains mandatory if your platform doesn’t handle it, and you should verify if any additional city taxes apply.
Grand Rapids
Grand Rapids addresses short-term rentals primarily through zoning and a rental certification program that includes periodic inspections. Hosts must ensure properties meet building safety requirements—especially if they offer the entire home to guests. While the city does not levy a specific short-term rental tax beyond state use tax, local authorities may consider new regulations if concerns about housing availability or neighborhood disturbances arise.
Ann Arbor
Home to the University of Michigan, Ann Arbor sees year-round demand for lodging from academic events and sports tourism. Certain neighborhoods and condo associations near campus place restrictions on short-term rentals. City officials have explored more formal ordinances, so it’s wise to follow local council discussions. Hosts must collect state use tax on short stays if not remitted by the booking platform.
Traverse City
A popular resort area on Lake Michigan, Traverse City has adopted regulations to manage the growing volume of vacation rentals. Short-term rentals often require a local permit and are subject to periodic inspections to ensure compliance with fire safety, occupancy limits, and parking requirements. The city may also collect local lodging taxes or tourism fees—confirm your obligations with the local government or lodging bureau.
Mackinac Island
Famed for its car-free streets and historical charm, Mackinac Island has tight controls on lodging to preserve its unique character. While full-time hotels dominate the island, property owners offering short-term stays might need approval from local authorities and must follow specific noise and nuisance ordinances. Collecting the state use tax is mandatory unless a platform already handles it.
Takeaway
Michigan’s tourism—spanning urban getaways to scenic Great Lakes adventures—makes short-term rentals an attractive business. Yet the lack of a single statewide standard means compliance differs based on municipality, HOA rules, and the state’s 6% use tax requirement. By researching your specific city or county’s approach to rentals, ensuring tax collection is handled properly, and keeping tabs on possible local lodging taxes, you can offer travelers a comfortable stay while operating within legal boundaries.
Stay informed of zoning updates, local council actions, and homeowner association stipulations to avoid fines or closure orders. With the proper due diligence, short-term rental hosts in Michigan can enjoy a profitable investment as they welcome guests looking to experience the state’s diverse cultural and natural offerings.
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