People sometimes claim that NJ’s decision to suddenly tax vacation rentals is “no big deal” because “other states have rental taxes and are doing fine”. What they don’t recognize is that while other states on the East coast do have rental taxes, most are lower than NJ’s. At least those that are in “competition” for NJ renters. CT and MA are higher for example. But there’s more to consider than just the rental tax rate. Keep in mind that of the 50 states and DC, NJ has the highest property taxes. Delaware has NO sales tax vs NJ’s 6.625%. And NC, while having similar rental taxes, have lower property taxes, lower property prices, longer rental season and lower rental rates than NJ. Also, this tax was implemented suddenly, in full, rather than gradually over time.
I compiled this list of rental taxes myself so it isn’t “official” or validated in anyway, but here is a comparison of “vacation taxes” and property taxes along the East Coast:
NY: Up to 7% : 4% state + 3% in some counties (most of Long Island: Nassau, Suffolk)
MD: 10.5% for Ocean City which is the comparison for the NJ Shore, but Up to 13% : 6% state, 4.5% for Worcester Cty – includes Ocean City, up to 7% in other parts of MD (Baltimore)
DE: Up to 11% : 8% state + up to 3% local occupancy taxes – but they have no sales taxes
MA: 11.7-15.2% depending on municipality
CT: 15% (recently increased from 12%)
NC: 12.75% : 6.75% state tax, and both county taxes in the OBX are 6%.
2019 Property taxes (Ranking out of 50 states + DC)*
DE: (6th) 0.56% – Median home Price: $239K – Annual Tax: $1,329
NC: (21) 0.86%, Median home Price: $161K – Annual Tax $1378
MD: (31st) 1.1% – Median home Price: $297K – Annual Tax: $3,257
MA: (34th) 1.22% – Median home Price: $353K – Annual Tax: $4,309
NY: (43rd) 1.68% – Median home price: $293k – Annual Tax: $4,915
CT: (48th) 2.07% – Median home Price: $270K – Annual Tax: $5,582
NJ: (51st) 2.4% – Median home Price: $321K – Annual Tax: $7,840
So the next time someone says the rental tax is “no big deal”, feel free to share this info.
* Property tax data source: WalletHub