Minnesota’s blend of natural beauty, from its iconic lakes and forests to vibrant city life in the Twin Cities, makes it a popular draw for business travelers and vacationers alike. Increasingly, property owners across the North Star State see short-term rentals as a lucrative opportunity, using sites like Airbnb and Vrbo to reach guests seeking unique accommodations. Although Minnesota does not impose a single, unified statewide regulation on short-term rentals, hosts face a patchwork of local rules and state-level tax obligations. This article outlines the essentials you need to know—from state taxes to local permitting—before starting a short-term rental business in Minnesota.
Minnesota’s Definition of a Short-Term Rental
Unlike some states with a defined statutory threshold, Minnesota does not universally categorize short-term rentals under a single label. In many cities or counties, lodging provided for fewer than 30 days is considered “transient.” Municipalities may reference terms like “vacation rental,” “short-term rental,” or “transient lodging” to define properties that serve guests on a nightly or weekly basis. Because local variations exist, property owners should confirm the exact definition and restrictions in their municipality before listing their rental.
Starting a Short-Term Rental Business in Minnesota
Most hosts begin by meeting state tax obligations, then verifying any local zoning or permitting requirements that might apply. Key steps include:
- Check Local Ordinances: Cities like Minneapolis and Saint Paul, as well as popular vacation destinations, often have short-term rental rules dictating permit requirements, occupancy limits, or safety standards.
- Register for Taxes: Hosts who collect payments directly (outside of a platform that automatically remits taxes) typically register with the Minnesota Department of Revenue if they’re subject to state sales or lodging taxes.
- Review HOA or Condo Bylaws: Some neighborhoods and developments place stringent restrictions or bans on transient rentals under 30 days.
If you plan to set up a specific legal entity (e.g., an LLC), ensure it’s registered with the Minnesota Secretary of Statebefore conducting business.
Short-Term Rental Licensing Requirement in Minnesota
Minnesota does not offer a dedicated, statewide short-term rental license. Instead, cities and counties decide whether to require a special permit, rely on existing lodging regulations, or impose minimal restrictions. Host obligations can include:
- Applying for a local short-term rental permit if your jurisdiction has enacted specific ordinances.
- Completing safety inspections that check for working smoke detectors, carbon monoxide alarms, and adequate exits.
- Observing occupancy or noise restrictions to ensure properties do not become a nuisance in residential areas.
Some rural counties may have looser regulations focused primarily on collecting taxes. However, more popular tourist spots near lakes and parks might adopt stricter rules to handle seasonal demand.
Minnesota Short-Term Rental Taxes
Short-term rental operators in Minnesota typically encounter multiple layers of taxes, which may include:
- State Sales Tax: Minnesota’s general state sales tax rate is 6.875%. Stays under 30 days often count as taxable lodging.
- Local Sales or Lodging Taxes: Counties, cities, or special districts can add their own lodging taxes, commonly around 3% to 5%, on top of the state rate.
- Special Tourism Taxes: Destinations with high visitor volume sometimes impose special tourism fees to fund local amenities or marketing efforts.
If a hosting platform (Airbnb, Vrbo, etc.) does not automatically handle these remittances, you must register with the Minnesota Department of Revenue to file. In many cases, hosts remit taxes on a monthly or quarterly schedule. Keeping accurate records of nights rented and total receipts helps ensure compliance.
Vacation Rental Tax Deductions
Minnesota property owners renting their homes for more than 14 days a year may qualify for federal tax deductions under IRS rules, lowering taxable income. Potential deductions include:
- Mortgage interest and property taxes
- Insurance and utilities
- Maintenance, repairs, and cleaning services
- Depreciation of the property and its furnishings
Keeping detailed documentation is crucial. The IRS often requires that hosts distinguish personal use days from rental days to allocate expenses accurately. Consulting a tax professional helps ensure you adhere to the latest federal guidelines.
Short-Term Rental Regulations by Major Locations in Minnesota
Minneapolis
Minneapolis enforces specific short-term rental regulations. Hosts listing entire units must register as “Short-Term Rental Platforms” or “Short-Term Rental Hosts” depending on whether they own multiple properties. The city focuses on safety, with required inspections and adherence to noise and occupancy standards, plus collection of local lodging taxes. Operators should confirm if their platform automatically remits taxes to both the state and the city.
Saint Paul
Saint Paul, the state’s capital, also requires short-term rental hosts to follow local rules focusing on zoning and noise ordinances. While the city does not fully ban short-term rentals, it can issue citations if properties violate safety codes or generate frequent neighbor complaints. Collecting the combined state sales tax plus any local lodging taxes applies unless covered by the hosting service.
Duluth
A popular gateway to Lake Superior and outdoor recreation, Duluth has considered limits on vacation rentals to preserve residential neighborhoods and manage visitor traffic. Certain areas require short-term rental permits or cap the number of vacation rentals allowed. The city may impose additional lodging taxes alongside the state sales tax, so verifying the local rate is essential for accurate remittances.
Rochester
Rochester, home to the Mayo Clinic, sees constant demand for lodging tied to medical visits and conferences. While it does not universally prohibit short-term rentals, local codes require compliance with building safety standards and collection of lodging taxes if not automatically handled by booking platforms. Operators should ensure guest stays do not infringe on residential zoning rules or cause parking congestion in quiet neighborhoods.
Brainerd Lakes Region
A major draw for fishing and summer getaways, this region encompasses multiple towns—each with its own approach to short-term rentals. Some require property owners to register or obtain a permit, especially near popular lakes where rental density is high. County governments often levy local lodging taxes, so confirm these with your local tax office or tourism bureau to remain compliant.
Takeaway
From the bustling Twin Cities to serene lakeside cabins, Minnesota’s varied landscape offers strong potential for short-term rental success. However, no single statewide regulation governs Airbnb hosts, resulting in differing rules on licensing, taxes, and occupancy. Confirming your municipality or county’s approach to short-term rentals—and making sure you collect all applicable sales and lodging taxes—are the cornerstones of legal compliance.
Keeping tabs on city council discussions or changes in county-level ordinances can help you adapt if new regulations emerge. With proper due diligence, thorough tax reporting, and respect for local noise and safety standards, you can provide guests a welcome stay in the Land of 10,000 Lakes while building a profitable short-term rental venture.
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