Sevier County Rental Cabin Owners Concerned About Property Tax Increase

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Rental property owners in Sevier County are facing a significant increase in their property taxes. The Sevier County Commission recently voted to affirm a 2021 state law that reclassifies all short-term rental properties as commercial properties, leading to a rise in property taxes from 25 percent to 40 percent. This decision has raised concerns among individuals who own and rent out cabin properties in the area.

Sevier County is known for its low property tax rates, which have made it an attractive location for short-term rental investors. However, the implementation of the new law has sparked worry among property owners. Daniel Montgomery, who has been in the short-term rental business for nearly a decade and owns 15 properties in Sevier County, expressed his concerns about the tax increase.

Currently, there are approximately 13,000 overnight rentals in Sevier County, with about 2,500 of them already subject to the 40 percent commercial property tax rate. The County’s resolution to affirm the state law will affect an additional 10,250 properties. Thomas King, the Sevier County property assessor, explains that hotels and motels already operate under the commercial property tax rate.

Local realtor, Krista Gallant, highlights several issues associated with the recent vote. One concern is that property owners were not involved in the decision-making process until it was too late. Additionally, the increased expense of property taxes may impact the return on investment for short-term rental owners. They may need to pass on the extra cost to guests or absorb it themselves, ultimately affecting their profitability.

The allocation of the additional tax revenue remains unclear. Despite Sevier County’s small population, it boasts a significant amount of tourism-related businesses, leading to a high sales tax influx. It raises the question of where the extra money from the increased property taxes will be allocated. The county acknowledges that it is an important matter that requires further clarification.

The Sevier County property assessor’s office plans to send out assessment change notices in May, along with a letter explaining the state law, to ensure that property owners are aware of the changes. The revised property tax rates will be reflected on tax bills scheduled to go out in October. Property owners will have until February 2024 to pay the adjusted tax amount.

In conclusion, owners of rental cabins in Sevier County are expressing their concerns about the recently approved property tax increase. The change in classification to commercial properties has led to a rise in property taxes from 25 percent to 40 percent for short-term rental properties. Property owners are worried about the impact on their investment returns and the allocation of the additional tax revenue. The Sevier County property assessor’s office is taking steps to inform property owners about the changes and ensure a smooth transition to the new tax rates.

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