Is a B&B always considered a commercial property for property tax purposes?

[lazarus]

My wife and I will be opening a new b&b in a few weeks, and are wondering if our three guest room setup (has always been a single family home...) would require/trigger reappraisal as a commercial or partial commercial property. The state is.... Connecticut. My wife and I will continue to live in the house as our primary residence.
and hello to you all.

 

[EmptyNest]

Welcome
You should have checked with local authorities before you even started. Local laws must be followed so we can't tell you one way or another. Did you check on your zoning requirements? We had 3 rooms and we were considered a commercial business in VA
have you taken an aspiring innkeeping class ? That is anothe thing on your must do list.
spend some time reading previous posts here and that will teach you a lot. Good luck

 

[Morticia]

Every local entity has different regulations. You really need to check with your town. Hopefully your new business does not come as a surprise to them and you subsequently find out you needed a variance to run an in home business.
Also, be sure you upgrade your homeowner's insurance to cover damages, theft, and get personal liability in case someone gets sick from breakfast. (That's not an insult on your cooking! Just a piece of advice.)

 

[Lee2014]

Welcome! I'm in NE as well. To answer your questions, you must check with your local and state laws. Take some innkeeping classes. There are some online as well. Grab a seat and stay awhile. We're fun, crazy, and down to earth here and total unique each and every one of us.

 

[Silverspoon]

We are a 3-room B+B in NE, just north of your state. We are considered a home business in a residential area and are taxed as a residence. As others have said, you need to do some research for your state.

 

[Copperhead]

Welcome! Good to have you here.

I agree with the others here. Each area has their own laws so you need to check with your local officials.

Morticia's additional advise is VERY important as well.

 

[GoodScout]

As mentioned, local and state laws vary widely. Here in Vermont, you can claim your B&B for a homestead exemption if it's your primary residence. The catch is, you can only do this if the deed is in your name.
If you buy the property through a C-corp or other legal entity, then it's not eligible for the homestead exemption.

 

[gillumhouse]

I am in West Virginia. The Assessor's office was quick to make a visit. THEY were going to give me 50/50 residence/commercial. The CPA I had at the time said no, you are 2/3 commercial and 1/3 residence. He also said the IRS looks very hard at small B &Bs because many people call themselves B & B for the tax deductions it gives but in reality are just a vacation spot for friends an family.
I went to the Assessor's office and had them list me as 2/3 commercial. I pay the highest rate they can charge for my real estate taxes - but can claim 2/3 of all expenses (utilities, etc) as business.
Hate to say this, but you need to check your city zoning ASAP and also find out about the hotel tax issues for your City/county/State.
Welcome and I hope all is kosher for your B & B.
Adding: In West Virginia, because we have claimed 1/3 as residence, that 1/3 is Homestead exemption (age 65 or older (or disabled) and lived in the house for 1 year) so no tax assessed until the assessed value is $20,001.

 

[lazarus]

thanks Silverspoon. I hope we are as lucky. yes, we are insured as a b&b. yes, we have P&Z approval. I only ask what your own experiences are for property tax status because B&B's are uncommon in our area and I want to be able to discuss the status of our very small business with our local assessor. It might help if I had some anecdotes and rationales. Are you seen as commercial or not? Amount of additional tax if required to convert to commercial? thanks again.

 

[Copperhead]

thanks Silverspoon. I hope we are as lucky. yes, we are insured as a b&b. yes, we have P&Z approval. I only ask what your own experiences are for property tax status because B&B's are uncommon in our area and I want to be able to discuss the status of our very small business with our local assessor. It might help if I had some anecdotes and rationales. Are you seen as commercial or not? Amount of additional tax if required to convert to commercial? thanks again..

thanks Silverspoon. I hope we are as lucky. yes, we are insured as a b&b. yes, we have P&Z approval. I only ask what your own experiences are for property tax status because B&B's are uncommon in our area and I want to be able to discuss the status of our very small business with our local assessor. It might help if I had some anecdotes and rationales. Are you seen as commercial or not? Amount of additional tax if required to convert to commercial? thanks again.

Ahhhh! Ok.

My place is considered residential with a variance to do our business. We are located in a residential area with only homes and a couple of churches around.
So not only what you are doing at the residence but where your residence is located may have an affect on how they see your property. If they were to change my status to commercial, it leads way to other properties to hop on the band wagon. Since property in this area is the highest taxed in the state, I am quite content having it labeled as it is.

 

[Morticia]

thanks Silverspoon. I hope we are as lucky. yes, we are insured as a b&b. yes, we have P&Z approval. I only ask what your own experiences are for property tax status because B&B's are uncommon in our area and I want to be able to discuss the status of our very small business with our local assessor. It might help if I had some anecdotes and rationales. Are you seen as commercial or not? Amount of additional tax if required to convert to commercial? thanks again..

thanks Silverspoon. I hope we are as lucky. yes, we are insured as a b&b. yes, we have P&Z approval. I only ask what your own experiences are for property tax status because B&B's are uncommon in our area and I want to be able to discuss the status of our very small business with our local assessor. It might help if I had some anecdotes and rationales. Are you seen as commercial or not? Amount of additional tax if required to convert to commercial? thanks again.

Commercial. We pay tax on a commercial property, known as mixed use.

 

[Alaska's Capital Inn]

Every local entity has different regulations. You really need to check with your town. Hopefully your new business does not come as a surprise to them and you subsequently find out you needed a variance to run an in home business.
Also, be sure you upgrade your homeowner's insurance to cover damages, theft, and get personal liability in case someone gets sick from breakfast. (That's not an insult on your cooking! Just a piece of advice.).

Every local entity has different regulations. You really need to check with your town. Hopefully your new business does not come as a surprise to them and you subsequently find out you needed a variance to run an in home business.
Also, be sure you upgrade your homeowner's insurance to cover damages, theft, and get personal liability in case someone gets sick from breakfast. (That's not an insult on your cooking! Just a piece of advice.)

X2

 

[BananaE29]

I haven't read the other responses to see if anyone in Texas chimed in. I have a homestead exemption on my property, and I think that's the only reason the county hasn't caught onto the fact that it is a commercial property. Keeping my fingers crossed that it continues as such.

 

[Hillbilly]

thanks Silverspoon. I hope we are as lucky. yes, we are insured as a b&b. yes, we have P&Z approval. I only ask what your own experiences are for property tax status because B&B's are uncommon in our area and I want to be able to discuss the status of our very small business with our local assessor. It might help if I had some anecdotes and rationales. Are you seen as commercial or not? Amount of additional tax if required to convert to commercial? thanks again..

Do you have a loan on your house? If you do is it a commercial loan? If its no,t they will call the note on the loan. We had a friend have this happen. They lost their house. There isn't a good way around it because the bank will be listed on the insurance as a beneficiary. The insurance will let them know at the time of being listed that its a commercial insurance policy. Then a red flag will appear. But hopefully its either paid for or a commercial loan. I just wanted to point this out in case others out there are doing this. I don't want you to loose your house!

 

[gillumhouse]

Once money crosses palms, it is commercial.

 

[lazarus]

thanks Silverspoon. I hope we are as lucky. yes, we are insured as a b&b. yes, we have P&Z approval. I only ask what your own experiences are for property tax status because B&B's are uncommon in our area and I want to be able to discuss the status of our very small business with our local assessor. It might help if I had some anecdotes and rationales. Are you seen as commercial or not? Amount of additional tax if required to convert to commercial? thanks again..

Do you have a loan on your house? If you do is it a commercial loan? If its no,t they will call the note on the loan. We had a friend have this happen. They lost their house. There isn't a good way around it because the bank will be listed on the insurance as a beneficiary. The insurance will let them know at the time of being listed that its a commercial insurance policy. Then a red flag will appear. But hopefully its either paid for or a commercial loan. I just wanted to point this out in case others out there are doing this. I don't want you to loose your house!
.

Do you have a loan on your house? If you do is it a commercial loan? If its no,t they will call the note on the loan. We had a friend have this happen. They lost their house. There isn't a good way around it because the bank will be listed on the insurance as a beneficiary. The insurance will let them know at the time of being listed that its a commercial insurance policy. Then a red flag will appear. But hopefully its either paid for or a commercial loan. I just wanted to point this out in case others out there are doing this. I don't want you to loose your house!

very good point -- we are "older" and have paid off our house, but we have a home equity line of credit for emergencies, and the bank requires proof of insurance which is now commercial... the bank seems to be accepting our new insurance, but they well might not have.

 

[JBloggs]

I think you answered your own question. If it is a business then it is a business.

 

[Silverspoon]

I think you answered your own question. If it is a business then it is a business..

Not always so, JB. We have a business license, are fully insured as a B+B business, inspected by health dept. in order to served a full breakfast. We are an official business. But as a "home business", we are only taxed a small amount for personal property located in the B+B. The bulk of our property taxes are at the residential rate which are based on land and building value if sold as a residence.

 

[OnTheShore]

In my home state and in the town/state where our business is located (a neighboring state), residential and commercial properties are taxed at the same "mil rate" -- of course, a property that is zoned / approved for commercial use might be assessed at a higher value than one only approved for residential use, and thus might pay higher taxes as a consequence, but at least in my area commercial property and residential property are taxed at the same rate.

 

[Breakfast Diva]

We're zoned rural residential and we have a special variance for our b&b. We are taxed as non-commercial for the property, but we also are taxed for our business items (personal property tax) which is only for businesses.
As you can see from all the varied responses, taxes are so variable that you must find out what your county/city does. It's interesting to see all the variables though!