Denver updates definition of primary residence for short-term rental hosts

The Denver City Council has approved new rules that tighten the definition of who’s allowed to get a license to offer short-term rentals within the city. The rules went into effect immediately.

In Denver, short-term rental hosts are only allowed to rent out their primary residence. In the past, this has been defined as “a residence which is the usual place of return for housing as documented by at least two of the following: motor vehicle registration, driver's license, Colorado state identification card, voter registration, tax documents, or a utility bill.”

The new rules change that definition to “the place in which a person’s habitation is fixed for the term of the license and is the person’s usual place of return.” The Department of Excise and Licenses may also take into account whether a short-term rental license applicant uses another home for "domestic, legal, billing, voting, or licensing purposes," how often they live at the property, and how often the property is rented out.

The department may also examine applicants’ employment and income as well as legal documents or tax records to determine whether a property qualifies as a primary residence.

The update to the law also raises short-term rental application fees from $0 to $50. Yearly licensing fees go up to $100 from $25. The extra funds will go toward regulation and enforcement costs.

Several Denver hosts have had their licenses revoked for offering nonprimary residences up for rent for short terms. And a few have been charged with felonies.

Under Denver’s vacation rental law, vacation rental hosts are also required to:

• Obtain written permission from landlords or owners
• Alert the company responsible for insuring the property that it will be used as a short-term rental
• Obtain liability insurance coverage for the property of at least $1 million. Operators may go through their short-term rental platform for liability insurance
• Notify their homeowners association before they rent out their property for short terms
• Have a smoke detector, carbon monoxide detector, and fire extinguisher in the rental

Short-term rental hosts in Denver are also required to collect taxes from guests, including city lodger’s tax and state sales tax. Before they can collect these taxes, hosts must register for tax licenses with both the city and the state.

Airbnb and Vrbo automatically collect both state and city tax for their Denver hosts. Even if a rental platform collects taxes for hosts, the host is still required to register for city and state tax licenses and file regular lodging tax returns with both authorities. 

MyLodgeTax can automate and simplify short-term rental tax compliance. For more on short-term rental taxes in Colorado, see our state Vacation Rental Tax Guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.

In response to the COVID-19 pandemic, city of Denver and the state of Colorado have implemented tax relief measures that may affect short-term rental hosts.

• Colorado has extended the April 20, 2020, deadline for filing and paying state sales taxes to May 20, 2020.
• The Denver Department of Finance (DOF) will waive the 15% penalty for late payment of March sales, use, and occupational privilege taxes due April 20, 2020. The return must be filed and payment made within 30 days of the due date.

For updated information on other local and federal responses to the pandemic that may affect short-term rental hosts, including income tax and property tax relief, see our COVID-19 tax relief roundup.