Bill to loosen rental limits tied to tax breaks advances in SC legislature

dbryant@thesunnews.comJune 29, 2013 

— State senators have compromised on a bill aiming to allow S.C. homeowners to rent their houses to vacationers more days a year and still pay the lower, owner-occupied property tax rate.

The bill that advanced in the Senate earlier this month would allow homeowners to rent their properties for as many as 72 days a year and keep the lower 4 percent tax rate, up from the current 14 days that is allowed. The proposal still must make it through the House, which won’t take up the issue until January.

Sen. Ray Cleary, R-Murrells Inlet and one of the bill’s sponsors, had asked for 100 rental days, but said this week that the compromise, if approved in the House, still would allow homeowners to take advantage of rentals for most of the busy summer season.

Cleary has said allowing the longer rental time is needed to give struggling homeowners some relief as their costs – especially wind and flood insurance – have skyrocketed while incomes for many have dropped because of the tough economy, leaving them trying to find a way to hang on.

More Grand Strand homeowners want to rent their properties during the in-demand summer tourist season while they live in an apartment or with relatives to offset those rising costs, Cleary said. The properties would have to be in areas that already allow vacation rentals.

South Carolina has two tax assessment rates for homes: 4 percent for owner-occupied homes, which cannot be rented out for more than 14 days under the current law; and 6 percent for second homes, investment property and properties that are rented out for more than two weeks.

Concern about homeowners renting out their houses during in-demand times has grown recently following a ruling last year by the S.C. Court of Appeals. A couple in Hilton Head Island rented out their house for 91 days during the summer 2008 – they earned $76,500 – but wanted to still claim the 4 percent tax assessment. The appeals court ruled that the couple were no longer eligible for the lower rate because the house was rented out for more than 14 days.

The proposal to allow more rental days would have more of an effect in the coastal counties, where there is demand for rental units during the summer. Officials aren’t sure how many homeowners in Horry and Georgetown counties would rent out their properties for the summer if given the chance.

A number of homeowners in Georgetown County, especially in the Waccamaw Neck area, already rent out for more than two weeks, but don’t file using the higher, 6 percent rate, the county has said.

Supporters have said the bill would give homeowners some relief and force others who are already renting out their properties to start charging the same accommodations and sales taxes as rental properties.

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