KNOXVILLE, Tenn. (WATE) – More than 10,000 short-term rental properties in Sevier County will soon be subject to a higher property tax rate after the county board of commissioners voted to affirm a 2021 state law.

The resolution passed Monday will see the property tax assessment rate for all short-term rentals, including Airbnb and Vrbo, will change from a 25% residential classification to a 40% commercial classification.

A county spokesperson said the resolution affirms a state law that went into effect in 2021 and subsequent guidance from the state Comptroller’s office that properties used as short-term rentals are classified as commercial properties unless certain exemptions are met.

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.

There are approximately 13,000 identified overnight rentals in Sevier County, the spokesperson said, and 2,500 were already being assessed at the 40% rate prior to the resolution.

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. The increase is approximately $222 per $100,000 of appraised value on short-term rentals.   

The increase will generate an estimated $8 million of new revenue.

With a county property tax rate of $1.48 per $100 of assessed value, Sevier County maintains one of the lowest property tax rates in Tennessee.

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 2023.

“Even though this update in state law certainly increases the amount of property tax a short-term rental will pay, on average short-term rentals across Sevier County are undervalued by over 53% since our last reappraisal in 2021.”

Sevier County Director of Public Affairs Tyler Basler