Alabama Short Term Rental Laws: Airbnb and Vacation Rental Regulations

Alabama short term rental laws are specific to the individual cities. Learn more about the licensing, restrictions and costs to operate an Airbnb in Alabama.

In recent years Alabama has become one of the top US markets for investing in an Airbnb rental property. The beautiful gulf coast, the charming resorts, the white beaches, the warm water, the US Space and Rocket Center, and the historic landmarks from the American Civil Rights Movement attract millions of visitors each year, especially in the spring and summer months. Many of these visitors prefer the comfort and coziness of vacation rentals over traditional hotels, which has driven the boom of the short-term rental industry in the State of Alabama.

Before you buy a vacation rental, you need to check the Alabama short term rental laws to make sure that this strategy is legal and feasible. Generally speaking, Alabama has not adopted any state-level regulations and requirements - except for tax purposes - and has left this to the county and city authorities. This is similar to Texas, California, and Florida, where a state vacation rental license is required.

As most Alabama cities have enacted their own vacation rental regulations, after discussing some state-level basics, we will take a detailed look at the laws applicable to six of the top Airbnb locations in Alabama. This will help you choose the best place to start or expand your short term rental business.

* If after reading this article you need help in buying and managing an Airbnb rental property in Alabama, make sure to contact us. Awning offers full-service vacation rental management including navigating the legal paperwork and requirements for an industry-low fee of 15% of monthly revenue.

Alabama’s Definition of a Short Term Rental

Unlike the majority of other US states, Alabama does not have a definition of short term rentals or vacation rentals. The only exception is for tax purposes. State and local lodging tax is levied on persons, firms, and corporations in the renting or furnishing of rooms, lodgings, or other accommodations to transients for periods of less than 180 days of continuous occupation. This applies to all charges for personal property used or furnished in this manner. For the purposes of Airbnb rentals, this means that the lodging tax is applied on the listing price including cleaning fees.

This tax rule sets Alabama short term rental laws apart from most other states. For example, in North Carolina lodging tax is levied on stays of less than 90 days, while this limit is 30 days according to short term rental laws in Tennessee.

Starting a Short Term Rental Business in Alabama

To start an Alabama Airbnb business, you don’t need to obtain any state-level permits or licenses. What you need to do is to obtain a state and local lodging tax account from the Alabama Department of Revenue in order to be able to file and pay the required taxes. You can register and apply online for free through the Alabama Business Tax Online Registration System. It usually takes 3-5 days to receive an account number. You don’t need to form an LLC to get a lodging tax account.

In case a property is rented out through a platform that collects and remits taxes directly, the owner does not need to register for a tax account.

Short Term Rental Licensing Requirement in Alabama

Running a short term rental business in the State of Alabama does not require a license or a permit. However, before investing in Airbnb, make sure to study the local short term rental laws and regulations in your market of choice. Most Alabama cities have adopted their own rules to protect local communities from some of the negative effects of the widespread vacation rental industry.

The only documents required to have an Alabama short term rental property are those associated with getting a lodging tax account. You can visit My Alabama Taxes (MAT) to apply online.

Alabama Short Term Rental Taxes

Alabama short term rental property owners need to pay a state and local lodging tax. This is levied on all fees associated with an occupancy of less than 180 consecutive days and includes cleaning fees, pet fees, extra bed fees, and others.

The state lodging tax rate in Alabama is 4% to 5% and can be filed and remitted on a monthly, quarterly, semiannual, or annual basis. There are discounts if taxes are paid on time: 5% on the first $100 in tax due and 2% on all tax above $100. Tax returns and remittances are due by the 20th day of the month following the taxable period.

County and city lodging tax rates vary and can also be paid monthly, quarterly, semiannually, or annually. The same discounts apply.

Vacation Rental Tax Deductions

In case you rent out your vacation home for more than 14 days per year and stay in it for less than 14 days per year, you qualify for short-term rental tax deductions. As an investor, you need to be aware of all applicable tax benefits in order to push up your bottom line.

You can write off the following expenses:

  • Mortgage interest
  • Mortgage insurance premiums
  • Property tax and other taxes
  • Depreciation
  • Maintenance work
  • Utilities
  • Supplies
  • Cleaning services
  • Accounting services
  • Home office expenses

Including all these deductions applicable to an Alabama short term rental can help you significantly reduce your running costs and enhance cash flow.

Short Term Rental Regulations by City in Alabama

Similar to the rest of the US Airbnb market, the Alabama vacation rental industry experienced a significant growth in the last decade. This has forced local authorities to adopt legislation to control the further spread of short term rentals and regulate existing ones in order to protect the wellbeing of communities and residents.

We will take a look at the city-level Airbnb laws and regulations in the six most popular Alabama markets.

Gulf Shores Short Term Rental Laws

The City of Gulf Shores defines short term rentals as units rented or leased for a period of less than 180 days. All rental property owners located within the City’s corporate limits or police jurisdiction need to apply for a business license.

Submitting a business license application for a rental property - including a short term rental - requires the following information:

  • Property type
  • Organization type
  • Owner information including legal name, mailing address, physical address, and phone number
  • Local emergency contact information including name, phone number, and email address
  • Lodging tax remittance information
  • Estimated annual gross income
  • Contact person including name, title, and phone number
  • Owners, partners, and officers information including names, driver’s license numbers, and titles

Unlike long term rentals, application for Alabama short term rental business license in Gulf Shores costs $45. Business licenses are valid until December 31st of each year and need to be renewed annually. They become delinquent after January 31st.

In addition to obtaining a business license prior to operating a vacation rental, the property needs to undergo a safety inspection once every three years.

Gulf Shores short term rental property owners need to pay a lodging tax as follows:

  • 4% to the State of Alabama
  • 2% to Baldwin County
  • 9% to the City if located in the corporate limits and 4.5% to the City if located in the policy jurisdiction

For a total of 15% for a Gulf Shores Airbnb property within the corporate limits and 10.5% within the police jurisdiction.

Overall, the City of Gulf Shores has very favorable vacation rental regulations, allowing the operation of non-owner occupied short term rentals.

Huntsville Short Term Rental Laws

The first step in starting an Airbnb business in the City of Huntsville is to contact the Zoning Administration to confirm that your property is located in an approved Zoning District. 

The next step is to apply for a business license - or an Airbnb permit - at the Clerk-Treasurer Department. To submit a business license approval application, you need to submit the following information:

  • Taxpayer name
  • Business trade name
  • Address and email address
  • Business description
  • Contact person information including name and phone number

The final step is paying a fee to receive your license. Licenses are valid until January 1st and become delinquent after January 31st. Thus, Huntsville Airbnb permits need to be renewed annually.

Local lodging taxes in Huntsville, AL include:

In general, Huntsville has very lean and friendly short term rental laws, and non-owner occupied Airbnb rentals are legal. This makes the city an ideal location for Airbnb investors.

Montgomery Short Term Rental Laws

The City of Montgomery has not enacted any short term rental legislation. Running an Airbnb business requires a standard business license.

To submit a business license application in Montgomery, you need the following information:

  • Business information including name, physical address, and nature of business
  • Business owner information including name, mailing address, phone number, and email address
  • Property owner information including name, mailing address, and phone number
  • Estimated gross annual receipts

Moreover, Montgomery Airbnb hosts need to pay lodging taxes:

  • 4% to 5% to the State of Alabama
  • $2.25 per room per day to Montgomery County
  • 11% to the City of Montgomery for short term rentals within the corporate limits and 5.5% within the police jurisdiction

Montgomery, Alabama short term rental laws are favorable and allow for investing in Airbnb properties.

Birmingham Short Term Rental Laws

The City of Birmingham does not regulate short term rentals. Applying for a business license requires submitting standard information. Business licenses need to be renewed each year as they expire on January 1st and become delinquent on February 15th.

Birmingham Airbnb property owners have to pay the following lodging taxes:

  • 4% to 5% to the State of Alabama
  • 2% to Jefferson County
  • 6.5% plus $3 per room per night to the City of Birmingham

Due to the lack of Birmingham, AL short term rental laws, the city remains an ideal place for buying an Airbnb property. However, investors should keep in mind that in recent years there has been a lot of talk about introducing such legislation. At the time of this article being written there are no proposed laws that investors should be aware of. 

Mobile Short Term Rental Laws

The City of Mobile has enacted a short term rental ordinance. A Mobile short term rental is defined as the rental of a dwelling unit including a room, building, house, or another structure or part of a structure that can be used as a transient sleeping place for less than 180 consecutive days.

To run a Mobile Airbnb business, the owner needs to:

  • Obtain a business license from the City of Mobile
  • Equip the property with operational smoke and carbon monoxide detectors and one fire extinguisher per floor

When applying for a business license, in addition to providing all standard information and documents, the Airbnb host also has to submit a notarized affidavit that all safety requirements are met.

Business licenses in Mobile are valid for one year and expire on December 31st, becoming delinquent on January 31st.

The city-level lodging tax for Mobile short term rentals is 8% within the corporate limits and 3% within the police jurisdiction.

The Mobile Airbnb rules are minimal, allowing real estate investors to make profitable investments in the city.

Tuscaloosa Short Term Rental Laws

The City of Tuscaloosa has the most detailed and strict short term rental laws among the Alabama cities investigated here.

A short term rental is defined as the transient use of any dwelling or part of it for overnight occupancy, where transient refers to the occupying of a dwelling for less than 30 days. This sets Tuscaloosa apart from the rest of Alabama, where Airbnb rentals are limited to occupancies of less than 180 days.

The City Ordinance allows Tuscaloosa short term rentals in three designated areas:

  • The Tourist Overlay (TO) Downtown-Campus District, where dwellings zoned for residential use are permitted by right to operate an Airbnb business for up to 45 days per calendar year.
  • The Outside TO Downtown-Campus District, where dwellings zoned for single family or multi family residential use are approved by special exception to operate a vacation rental through the Zoning Board of Adjustment.
  • The Inspection/Police Jurisdiction, where dwellings are permitted by right to operate a short term rental.

To start a Tuscaloosa Airbnb business in a permitted district you’ll need a short term rental permit. 

To qualify for a Tuscaloosa short-term rental permit you’ll need:

  • Short term rental application
  • Short term rental provisions
  • ZBA petition if operating for more than 45 days in the Historic District within the TO Downtown or Outside TO: Inside City Limits
  • Designation of agent if the owner is not the applicant
  • Home inspection affidavit
  • Dock inspection report
  • Insurance requirement
  • Business license application
  • Letter of permission from HOA or property manager in condos, apartments, and rental properties

Tuscaloosa short term rental permits need to be renewed annually, starting on January 1st.

The city lodging tax payable by vacation rental owners is 11% within the city and 5.5% within the police jurisdiction.

Tuscaloosa has some of the most restrictive short term rental laws in the State of Alabama as Airbnb is not allowed in all zoning districts. Thus, investors need to study the local market carefully before deciding to purchase a specific property.

Takeaway

There are many factors that make the Yellowhammer State a great location for Airbnb investments, and the laidback Alabama short term rental laws are one of them. With no state-level regulations and most cities simply requiring a business license and paying taxes, starting an Alabama vacation rental business is easy and straightforward. And that’s one of the things a savvy real estate investor should be after.

* If after reading this article you need help in buying and managing an Airbnb rental property in Alabama, make sure to contact us. Awning offers full-service vacation rental management including navigating the legal paperwork and requirements for an industry-low fee of 15% of monthly revenue.

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