Kentucky Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Kentucky?

Kentucky has seen a surge in short-term rentals through platforms like Airbnb and VRBO in recent years. However, navigating the legal landscape can be complex for hosts. This article delves into the key regulations governing short-term rentals in Kentucky, with insights from state laws, local ordinances, and real estate forums.

Starting a Short-Term Rental Business in Kentucky

Before launching a short-term rental in Kentucky, hosts must understand and comply with various state and local regulations:

• Obtain necessary permits and licenses: Many counties and cities, such as Boone County, require a valid Short-Term Rental Permit and compliance with zoning regulations.
• Adhere to local ordinances: Rules can vary significantly by location. For instance, Bowling Green prohibits short-term rentals in single-family residential districts, while allowing Bed and Breakfasts with a special permit.
• Register with the city: In Louisville, hosts must register their short-term rental property and maintain an active registration.
• Meet safety standards: Properties must have functioning smoke detectors, carbon monoxide detectors, fire extinguishers, and adhere to building codes.

Hosts should thoroughly research the specific requirements in their area to ensure full compliance.

Short-Term Rental Licensing Requirements in Kentucky

In Kentucky, short-term rental licensing requirements vary by city and county. Here's a comprehensive overview of the licensing process in some key areas:

Lexington-Fayette County

Lexington has implemented detailed STR regulations that came into effect in July 2023. To operate an STR in Lexington, hosts must obtain:

1. A Zoning Compliance Permit from the Division of Planning
2. A Business License from the Division of Revenue
3. A Special Fees License from the Division of Revenue

The application process involves:

1. Submitting a completed online STR registration form
2. Providing an Excel document with details of each STR property
3. Supplying a website address for guest reviews and complaints
4. Paying an annual licensing fee of $200 for the first unit and $100 for each additional unit

The process typically takes 2-4 weeks to complete, depending on the volume of applications.

Louisville

Louisville's STR regulations require hosts to:

1. Register with the city
2. Obtain a business license
3. Pass a property inspection

The annual STR registration fee in Louisville is $250. Hosts must also register with the Louisville Metro Revenue Commission for tax purposes.

Frankfort

In Frankfort, STR hosts must:

1. Submit an annual registration form to the Department of Planning and Community Development
2. Obtain a business license through the City's Finance Department
3. Request a rental housing inspection at the time of annual registration

Penalties for Non-Compliance

Operating an unlicensed STR can result in significant penalties:

1. In Lexington, fines for violations start at $125 for a first offense and can escalate to $1,000 for repeated offenses. Failure to obtain a Special Fees License can result in daily penalties of $500 and/or imprisonment for up to 12 months.
2. In Louisville, fines begin at $125 for a first offense and increase to $1,000 for subsequent violations.
3. Many cities also prohibit advertising unlicensed STRs on platforms like Airbnb and Vrbo.

It's crucial for hosts to research and comply with their specific local regulations, as requirements and penalties can vary significantly between jurisdictions. The licensing process typically takes several weeks to complete, so prospective hosts should plan accordingly before listing their properties.

Required Documents for Kentucky Short-Term Rentals

Navigating the requirements for short-term rentals in Kentucky can be complex, but understanding the necessary documents is crucial for compliance. This guide aims to simplify the process for prospective hosts.

Zoning Compliance Permit: Required from the Division of Planning to ensure the property complies with local zoning regulations.

Business License: Issued by the Division of Revenue, allowing the operator to conduct business in the county.

Special Fees License: Also from the Division of Revenue, with an annual renewal. The fee is $200 for the first unit and $100 for each additional unit.

To apply for the Special Fees License, the following documents are needed:

1. Completed application with an attached Excel document detailing the rental properties.
2. Sworn affidavits by the applicant and the property owner (if different).
3. Zoning Compliance Permit for each property.
4. Site and floor plan of the rental property.
5. Proof of general liability insurance (minimum $1 million).
6. For properties with septic tanks, evidence of tank capacity.
7. For Hosted Short-Term Rentals, two forms of residency proof.

Additionally, licensees must provide guests with:

1. Emergency contact information
2. An evacuation plan
3. Trash/recycling details
4. A link to review STR ordinances

These documents are essential for ensuring that short-term rental operators comply with local regulations, maintain safety standards, and contribute to the local economy through proper licensing and fees. Failure to provide these documents and obtain the necessary licenses may result in fines of up to $500 per day.

Kentucky Short-Term Rental Taxes

Short-term rental operators in Kentucky must navigate a complex tax landscape that includes state, county, and sometimes city-level taxes. Understanding these tax obligations is crucial for compliance and proper financial planning. Here's a breakdown of the primary taxes that apply to short-term rentals in Kentucky:

State Sales Tax: Kentucky imposes a 6% sales tax on the gross receipts from short-term rentals, including any cleaning fees, for reservations of 29 nights or fewer.

Kentucky Transient Room Tax: A 1% state transient room tax applies to all short-term rental reservations, regardless of length.

Local Transient Room Taxes: Many counties and cities in Kentucky impose additional transient room taxes. For example:

• Lexington-Fayette County: 8.5% of the listing price for reservations of 29 nights or shorter.
• Louisville-Jefferson County: 8.5% transient occupancy tax for reservations of 29 nights or shorter.
• Northern Kentucky (Boone, Campbell, and Kenton counties): 3% transient room tax, plus an additional 1% special transient room tax and 1% additional transient room tax.
• Oldham County: 3% transient room tax on all reservations.
• Woodford County: 3% transient room tax for reservations of 30 nights or shorter.
• Bowling Green: 3% transient room tax plus an additional 1% transient room tax on all reservations.

Occupational License Fee: Some cities, like Lexington, require short-term rental operators to pay an occupational license fee on net profits earned from their rentals.

It's important to note that while platforms like Airbnb and Vrbo often collect and remit state sales tax and transient room tax, they may not handle all local taxes. Hosts should verify which taxes are covered by their booking platform and which they need to remit themselves.

Possible Write-offs and Deductions

Short-term rental operators in Kentucky can potentially deduct various expenses related to their rental business, including:

1. Mortgage interest and property taxes
2. Insurance premiums
3. Utilities (electricity, water, gas, internet)
4. Cleaning and maintenance costs
5. Furnishings and supplies
6. Depreciation of the property and assets
7. Marketing and advertising expenses
8. Professional fees (accounting, legal, property management)
9. Travel expenses related to managing the property
10. Home office expenses (if applicable)

It's crucial to keep detailed records of all expenses and consult with a tax professional familiar with Kentucky's tax laws to ensure you're maximizing your deductions while remaining compliant with state and federal tax regulations.

Remember, tax laws can be complex and subject to change. Always consult with a qualified tax professional for personalized advice on your specific situation and to ensure you're meeting all your tax obligations as a short-term rental operator in Kentucky.

Does Kentucky Strictly Enforce STR Rules?

Based on discussions among Airbnb hosts on platforms like Bigger Pockets and Reddit, it appears that Kentucky's enforcement of short-term rental regulations varies significantly across different cities and counties. However, a clear trend emerges when examining the state's overall approach to STRs.

Kentucky, as a whole, can be considered moderately Airbnb-friendly compared to other states with more stringent regulations like New York or California. While the state does have regulations in place, they are generally less restrictive and allow for a thriving STR market in many areas.

In Lexington-Fayette County, for example, enforcement is relatively strict. One host on Reddit commented, "I've been operating my Airbnb in Lexington for over a year now, and while I had to go through the licensing process and pay the fees, I haven't had any major issues with the county. As long as you follow the occupancy limits and keep your neighbors happy, you should be fine". This suggests that while the rules are enforced, they are not overly burdensome for compliant hosts.

Louisville, on the other hand, has faced challenges with enforcement. A host on Bigger Pockets noted, "Louisville has very strict guidelines... you could only have like a one short-term rental per 600 ft". Despite these restrictions, many hosts continue to operate in the city, indicating that enforcement may not be as rigorous as the regulations suggest.

In smaller cities and rural areas of Kentucky, enforcement tends to be more relaxed. Hosts on Reddit have reported operating STRs with minimal interference from local authorities, as long as they're not causing disturbances or safety issues.

It's clear that many hosts in Kentucky continue to operate STRs despite the rules, particularly in areas where enforcement is less stringent. On Reddit, one user shared, "I understand the need for some regulation, but the occupancy limits and licensing fees seem a bit excessive. It's making it harder for small-scale hosts like myself to operate profitably. I hope the city will consider the impact on responsible hosts who are just trying to make ends meet". This sentiment is echoed by many hosts who continue to operate while advocating for more balanced regulations.

In conclusion, while Kentucky does have STR regulations in place, the state's overall approach can be characterized as moderately enforced and relatively Airbnb-friendly compared to more restrictive states. Hosts continue to operate throughout Kentucky, adapting to local regulations and finding ways to maintain profitable STR businesses despite the rules in place.

How to Start a Short-Term Rental Business in Kentucky

Starting a short-term rental business in Kentucky can be a rewarding venture. Here's a comprehensive guide to help you navigate the process:

Research local regulations:

Thoroughly investigate the specific STR regulations in your city or county. Kentucky's rules vary significantly by location, so understanding local ordinances is crucial. Check with your local planning and zoning department for the most up-to-date information.

Tip: Join local real estate investor groups or online forums to connect with experienced STR operators in your area.

Choose your property:

Select a property that complies with local zoning laws and has potential for high occupancy rates. Consider factors like proximity to attractions, ease of access, and neighborhood appeal.

Tip: Use data analytics tools like BNBCalc to research the most profitable areas for STRs in Kentucky.

Obtain necessary permits and licenses:

Apply for all required permits and licenses, which may include:

• Zoning Compliance Permit
• Business License
• Special Fees License
• STR Registration

Tip: Create a checklist of required documents and set reminders for renewal dates to stay compliant.

Prepare your property:

Ensure your property meets all safety requirements, including:

• Functioning smoke and carbon monoxide detectors
• Fire extinguishers
• Emergency exit plans
• Proper insurance coverage

Tip: Consider hiring a professional home inspector to identify any potential issues before guests arrive.

Set up your business structure:

Decide on a business entity (LLC, sole proprietorship, etc.) and register with the Kentucky Secretary of State. Consult with a tax professional to understand the implications of each structure.

Tip: An LLC can provide personal liability protection and potential tax benefits for STR operators.

Open a business bank account:

Separate your personal and business finances by opening a dedicated business bank account and credit card.

Tip: Look for business accounts that offer perks like cash back on purchases for your rental property.

Develop a pricing strategy:

Research comparable properties in your area and set competitive rates. Consider using dynamic pricing tools to optimize your rates based on demand.

Tip: Offer discounts for extended stays to attract longer bookings and reduce turnover costs.

Create listing profiles:

Set up attractive listings on platforms like Airbnb, VRBO, and Booking.com. Use high-quality photos and detailed descriptions to showcase your property.

Tip: Highlight unique features of your property and nearby attractions to stand out from competitors.

Establish operational procedures:

Develop systems for guest communication, check-in/out processes, cleaning, and maintenance. Consider using property management software to streamline operations.

Tip: Create a comprehensive house manual to answer common guest questions and reduce the need for constant communication.

Market your property:

Promote your STR through social media, local tourism boards, and by partnering with local businesses.

Tip: Offer special packages or experiences to attract guests, such as tickets to local events or partnerships with local tour operators.

Manage guest experiences:

Focus on providing exceptional guest experiences to earn positive reviews and repeat bookings. Respond promptly to inquiries and address any issues quickly.

Tip: Consider offering small welcome gifts or personalized recommendations to create memorable stays.

Stay informed and adapt:

Keep up with changes in local regulations, market trends, and guest preferences. Be prepared to adjust your strategy as needed.

Tip: Attend local STR host meetups or industry conferences to stay informed and network with other operators.

By following these steps and continuously refining your approach, you can build a successful short-term rental business in Kentucky. Remember to always prioritize compliance with local regulations and focus on creating positive experiences for your guests.

Who to Contact in Kentucky about Short-Term Rental Regulations and Zoning?

When navigating the complex landscape of short-term rental regulations and zoning in Kentucky, it's essential to know who to contact for accurate information and guidance. Here are some key resources for hosts:

Kentucky Department of Revenue: For questions related to state-level taxes, such as the transient room tax and sales tax, contact the Kentucky Department of Revenue.

• Phone: (502) 564-5170
• Email: DOR.WebResponseSales@ky.gov
• Address: 501 High Street, Frankfort, KY 40601

Local Planning and Zoning Departments: Each city and county in Kentucky has its own planning and zoning department responsible for enforcing local STR regulations. Contact your local department for information on permits, licenses, and zoning requirements.

• Lexington-Fayette Urban County Government Division of Planning: (859) 258-3160, planningmailbox@lexingtonky.gov
• Louisville Metro Department of Planning and Design Services: (502) 574-6230, PlanningInfo@louisvilleky.gov
• Bowling Green Planning Commission: (270) 842-1953, planning.commission@bgky.org

Local Revenue Commissions: For questions about local occupational taxes and business licenses, contact your city or county's revenue commission.

• Lexington-Fayette Urban County Government Division of Revenue: (859) 258-3340, revenueinfo@lexingtonky.gov
• Louisville Metro Revenue Commission: (502) 574-4860, metrorevenue@louisvilleky.gov

Kentucky Real Estate Commission: The Kentucky Real Estate Commission oversees licensing and regulation of real estate professionals in the state. They can provide guidance on property management and real estate laws that may impact STR hosts.

• Phone: (502) 564-7760
• Email: kydre.realestateeducation@ky.gov
• Address: 500 Mero Street 2NE09, Frankfort, KY 40601

In addition to these official resources, Kentucky hosts can benefit from connecting with local STR communities and forums:

• BiggerPockets Kentucky Forums: BiggerPockets has several Kentucky-specific forums where hosts can discuss local regulations, share experiences, and seek advice from other investors and operators.
• Louisville & Surrounding Counties: https://www.biggerpockets.com/forums/763-louisville-surrounding-counties
• Lexington & Central Kentucky: https://www.biggerpockets.com/forums/760-lexington-central-kentucky
• Kentucky Airbnb Hosts Facebook Group: This Facebook group is dedicated to Airbnb hosts in Kentucky, providing a platform for discussion, resource sharing, and networking.
• Reddit Communities: Reddit has several subreddits where Kentucky hosts can engage in discussions about local STR regulations and best practices.

By leveraging these official contacts and online communities, short-term rental hosts in Kentucky can stay informed about local regulations, connect with fellow operators, and access the resources needed to run successful and compliant STR businesses.

What Do Airbnb Hosts in Kentucky on Reddit and Bigger Pockets Think about Local Regulations?

To gain insight into the experiences and opinions of Airbnb hosts in Kentucky regarding local regulations, we searched through relevant threads and forums on platforms like Reddit and Bigger Pockets. Here are a few notable examples:

Reddit - r/Louisville: "What's new with being an AirBNB in Lou?"

In this thread, hosts discuss the current state of short-term rental regulations in Louisville. One user mentions that all short-term rental hosts must annually register each of their rentals with Louisville Metro's Office of Planning & Design Services. The thread also touches on the housing crisis and the role of STRs in the local market.

Bigger Pockets - Lexington Airbnb Hosts Forum: A host shared their experience with the licensing process, stating, "I just went through the process of obtaining my STR license in Lexington. It was a bit time-consuming, but not too difficult. The most important thing is to make sure you have all the required documents and that your property meets the occupancy and safety requirements. The city is definitely enforcing the rules, so it's crucial to be compliant."

BiggerPockets Louisville Forum: This forum is part of the larger BiggerPockets platform, which focuses on real estate investing. Hosts can connect with other local STR operators, share experiences, and seek advice on navigating regulations and best practices.

These sources demonstrate that Airbnb hosts in Kentucky are actively engaged in discussions about local STR regulations. While some hosts express concerns about the impact of these regulations on their businesses, others share their experiences navigating the registration process and complying with zoning requirements. Overall, these forums serve as valuable resources for hosts seeking to understand and adapt to the evolving regulatory landscape in Kentucky.

Disclaimer: While we here at BNBCalc strive to keep all of our regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each area and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.