New Property Tax Classification Has Some Minnesota Cabin Owners Scrambling

MINNEAPOLIS (WCCO) -- There could be fewer rental options up north this summer as cabin owners await action at the State Capitol.  A change in property taxes has left some owners no choice but to pull their listings to avoid a much bigger tax bill.

But, a proposal in St. Paul could clear up an uncertain future.

Nancy Voth made the move from Minnesota to Seattle a few years ago, so her summers on scenic Lake Vermillion have been shorter.

"We grew up going to Northern Minnesota on family vacations," Voth said.

As property taxes on their three-bedroom cabin continued to climb to $12,500 a year.

"To help offset some of those property taxes we thought let's rent it out a few weeks during the summer when we're not going to be using it," Voth said.

Until January, when they learned they'd instead be more than doubling their tax bill to $26,000 a year. What went through her mind when she saw that?

"Probably some words that can't be repeated on television," Voth replied.

After the explosion of the VRBO and Airbnb market, Minnesota's Department of Revenue told all 87 County Assessors to clarify vacation rentals, pushing the tax class to commercial property.

"We can't possibly come out ahead," Voth said.

That left Voth little choice but to pull their listing, sending eight families who booked a week each to look elsewhere.

As spokesperson for the Cook County Chamber of Commerce, Judy Erickson is lobbying for change at the State Capitol.

"There's a lot of confusion and uncertainty," Erickson said.

Their proposal calls for creating a new tax class for short-term rentals: a 1.25% increase and taxable for school referendum purposes.

"People recognize that taxing family homes and condos that are being rented seasonally as commercial is too far," Erickson said.

But, until the legislature acts cabin owners, like the Voths, will do what they can to cut costs.

"Just have to wait and see what happens," Voth said.

Erickson expects the Senate bill to be introduced this week at the capitol.  The House version was introduced last week. All changes would take effect for the 2021 tax year.