SEVIER COUNTY, Tenn. (WATE) – Sevier County is home to thousands of rental cabins and property owners will soon be paying more property taxes.
Earlier this week the Sevier County Commission voted to affirm a 2021 state law that will see the property tax assessment rate for all short-term rentals, including Airbnb and Vrbo, change from a 25% residential classification to a 40% commercial classification.
For example, a rental cabin with an appraised value of $500,000 would go from paying $1,850 in annual property county tax to $2,960, the spokesperson said.
Sevier County has some of the lowest county property tax rates in the country, which makes the area prime real estate for short-term rental investors.
Essentially, properties with a business license that are a short-term rental and not the owner’s principal residence will be subject to the change in classification.
Daniel Montgomery is a short-term renter investor.
“I have been in the short-term rental business for about eight or nine years, and between my family,” he said. “We have 15 properties local here in Sevier County that we rent ourselves.”
Montgomery rents out his properties through Vrbo and Airbnb.
His rentals are among the more than 10,000 that will see a 15% increase in property taxes come this fall.
“Currently in Sevier County, there are about 13,000 overnights now there are about 2,500 of them that for some time have already been at 40%,” Sevier County Property Assessor Thomas King. “The state law that became effective in 2021 refers to the county’s resolution affirming state law. This will affect about 10,215.”
King added that hotels and motels are already operating under the commercial property tax rate. One local realtor, Owen Poveda, said he sees several issues with this recent vote.
“Property owners weren’t basically involved until it was too late and the other thing is you know if you own a short-term rental you’re buying it for return on investment now you just added one more expense that you have to recoup in order to break even on these things.”
Montgomery said it’s just more money they have to give the county.
“It’s just another tax, another fee that you have to pass along to the guest or decide whether to eat it yourself and so my big question is where does the extra money go? I mean I know we have such a tremendous sales tax influx here because we’re really a small county population wise but, because of tourism, we have such a largely disproportionate amount of business here that we got the sales tax dollars coming in this county per resident are the highest in the state”
The county said they’re just following state law. The increase will generate an estimated $8 million of new revenue.
“At this time I do not know where the money would go,” King said.
The Sevier County Property Assessor’s Office will send out assessment change notices with a letter explaining the state law in May.
The changes will be reflected on tax bills scheduled to go out in October. Payment will be due by February 2024.