San Diego Vacant Home Tax: 10,600 Properties Face $5,000/Bedroom Before June 2026 Ballot - Should You Sell Now?
TL;DR: Critical Decision Window for 10,600 Property Owners
San Diego property owners face a compressed timeline before the June 2026 ballot vote on the Vacation Home Operation Tax. This measure would impose a $5,000 annual tax per bedroom on approximately 10,600 properties—5,600 short-term rentals and 5,000 vacant second homes. For a typical three-bedroom coastal property, that's $15,000 annually ($150,000 over 10 years). With a March 2026 Council vote preceding the June ballot, property owners have just months to decide: sell now for certainty, hold and hope voters reject it, or convert to long-term rentals. Cash buyers offering 7-14 day closings provide the fastest exit before potential tax implementation.
San Diego property owners are facing a critical decision point in early 2026. The proposed Vacation Home Operation Tax, which would impose a $5,000 annual tax per bedroom on approximately 10,600 properties across the city, is advancing toward the June 2026 ballot after the City Council Rules Committee voted 3-1 in October 2025 to draft the measure. For owners of vacation rentals, short-term rentals, and vacant second homes in Pacific Beach, La Jolla, Mission Beach, and Ocean Beach, the timeline is compressed: a full City Council vote is expected in March 2026, giving property owners just a few months to evaluate their options.
The stakes are substantial. A typical three-bedroom coastal property would face a $15,000 annual tax bill if the measure passes, while four-bedroom homes would owe $20,000 per year. With approximately 5,600 short-term vacation rentals and 5,000 vacant second homes in the crosshairs—representing about 2% of all San Diego homes—Councilmember Sean Elo-Rivera's proposal has created what many real estate experts are calling a "motivated seller window" before potential tax implementation.
This comprehensive analysis examines the proposal's mechanics, timeline, financial impact, and what it means for property owners considering their next move. Whether you're an investor with a Pacific Beach rental, a La Jolla second-home owner, or someone managing an Airbnb in Mission Beach, understanding this measure's implications is essential for making an informed decision in the coming weeks.
What Is the Vacation Home Operation Tax and Why June 2026 Matters
The Vacation Home Operation Tax to Preserve Housing represents San Diego's most aggressive attempt yet to address its housing crisis by targeting properties that city officials argue are sitting empty or operating as full-time vacation rentals instead of housing long-term residents. Spearheaded by Councilmember Sean Elo-Rivera, the proposal would impose a $5,000 annual tax per bedroom on qualifying properties.
The measure's urgency stems from its compressed timeline. After the Rules Committee's 3-1 vote on October 22, 2025, city staff are now drafting detailed ballot measure language. The committee is expected to review the completed fiscal and operational analysis from the Independent Budget Analyst, City Treasurer, and City Attorney in January or February 2026. The full City Council must then vote by early March 2026 to officially place the measure on the June 2026 ballot.
Critical Three-to-Six-Month Decision Window
If the measure passes in June with a simple majority (50% plus one vote, since it's a general tax), implementation could begin as early as late 2026. Property owners who want to exit before facing potential tax liability have essentially until the March Council vote to list and close on sales with certainty, or risk holding through the June ballot outcome.
The proposal targets two distinct categories: full-time short-term vacation rentals (properties rented primarily through platforms like Airbnb and VRBO) and vacant second homes (properties that aren't the owner's primary residence and aren't rented to long-term tenants). This dual focus distinguishes it from San Diego's existing short-term rental regulations, which cap licenses and impose transient occupancy taxes but don't directly tax vacant properties.
Who Gets Taxed: 5,600 Short-Term Rentals + 5,000 Vacant Second Homes
According to city estimates, approximately 10,600 properties would be affected by the Vacation Home Operation Tax—roughly 5,600 short-term vacation rentals and 5,000 vacant second homes. This represents about 2% of all homes in San Diego, but the impact is geographically concentrated in the city's most desirable coastal neighborhoods.
Short-Term Vacation Rentals (5,600)
Properties rented full-time on platforms like Airbnb, VRBO, and similar services—not homeowners who occasionally rent out a spare bedroom while living on-site. Many clustered in Pacific Beach, Mission Beach, La Jolla, and Ocean Beach where vacation rental demand is highest.
Vacant Second Homes (5,000)
Properties not the owner's primary residence and not rented to long-term tenants. Investment properties held for appreciation, out-of-state owners' occasional-use beach homes, or properties in transition. Already fail to qualify for the homeowner's exemption.
Geographic concentration is significant. While the city hasn't released a neighborhood-by-neighborhood breakdown, real estate professionals familiar with San Diego's vacation rental market estimate that coastal communities house the majority of affected properties. Pacific Beach, with its walkable beach scene and nightlife, has long been a short-term rental hotspot. La Jolla's luxury vacation rentals command premium rates from tourists seeking upscale beach access. Mission Beach and Ocean Beach, with their distinct beach cultures and proximity to attractions, similarly host substantial vacation rental inventories.
The Math: $15,000-25,000 Annual Tax Bills for Typical Coastal Properties
The financial impact of the Vacation Home Operation Tax is straightforward to calculate but potentially devastating for property owners: $5,000 per bedroom, annually. This per-bedroom structure means tax liability scales directly with property size.
| Bedrooms | Annual Tax | 10-Year Total | Typical Property Type |
|---|---|---|---|
| 2 | $10,000 | $100,000 | Pacific Beach condo |
| 3 | $15,000 | $150,000 | Single-family beach home |
| 4 | $20,000 | $200,000 | Larger vacation rental |
| 5 | $25,000 | $250,000 | La Jolla luxury estate |
Real-World Impact Example
Consider a property owner who purchased a three-bedroom home in Pacific Beach as an investment property for $1.3 million (the approximate median home price in the neighborhood). Their annual property tax bill is roughly $13,000 based on California's 1% base rate plus local assessments.
The Vacation Home Operation Tax would add another $15,000, effectively doubling their total tax burden to $28,000 annually.
The revenue math works from the city's perspective. With 10,600 properties affected at an average of approximately three bedrooms per property, the city estimates the tax could generate between $100 million and $135 million annually. Councilmember Elo-Rivera's office has cited the higher $135 million figure, which would flow into San Diego's general fund to support city services including police, fire protection, libraries, parks, housing programs, and infrastructure improvements.
Cash flow becomes the critical consideration. A three-bedroom Pacific Beach vacation rental generating $75,000 in annual gross rental income would need to absorb a $15,000 tax expense, plus existing property taxes, insurance, maintenance, and management fees. Many vacation rental owners operate on already-thin margins, and an additional $15,000 annual expense could render properties cash-flow negative.
Critical Timeline: October 2025 Rules Committee Vote to June 2026 Ballot
Understanding the Vacation Home Operation Tax timeline is essential for property owners making decisions about their holdings. Each milestone brings the potential tax closer to reality and narrows the window for action.
| Date | Event | Significance for Property Owners |
|---|---|---|
| October 22, 2025 | Rules Committee 3-1 vote | Measure advances to drafting phase |
| January-February 2026 | Rules Committee review | Last opportunity for public comment |
| March 2026 | Full City Council vote | Determines if measure reaches ballot |
| June 2026 | Voter ballot decision | Simple majority required to pass |
| Late 2026/Early 2027 | Implementation if passed | Tax collection begins |
October 22, 2025: Rules Committee Vote
The Rules Committee voted 3-1 to start drafting the ballot measure. Councilmembers Sean Elo-Rivera (proposer), Joe LaCava (Council President), and Kent Lee voted yes. Councilmember Raul Campillo cast the lone no vote, expressing concerns that the tax would "kill jobs and negatively impact the tourism economy."
This timeline creates distinct decision points for property owners. Those who want certainty can sell before the March Council vote, eliminating exposure to the tax entirely. Those willing to accept risk might wait through the June ballot, hoping voters reject the measure, but this strategy means holding a property that may have already declined in value if other owners flood the market attempting to sell ahead of potential tax implementation.
The compressed timeline also affects real estate professionals. Property listing, marketing, buyer due diligence, escrow, and closing typically consume 30-60 days in traditional sales. Cash buyers can accelerate this to 7-14 days, offering a faster exit path for property owners who decide late in the process that they want to sell before March.
How the $5,000/Bedroom Tax Works: Exemptions and Definitions
The Vacation Home Operation Tax includes several critical exemptions that determine who pays and who doesn't. Understanding these distinctions is essential for property owners evaluating their exposure.
✓ Primary Residence Exemption
If you live in your home as your primary residence, you will not pay this tax, regardless of whether you occasionally rent it out. This exemption protects the vast majority of San Diego homeowners. Councilmember Elo-Rivera has stated that "99% of San Diegans would not pay this tax" and "100% of homes that are lived in by San Diegans will not be taxed." Properties qualifying for the county's Homeowners' Exemption are automatically exempt.
✓ Hosted Rental Exemption
Homeowners who rent out a spare bedroom while living on-site are exempt. This protects San Diegans who supplement their income by hosting guests in their own homes. The key distinction is whether you live in the home: occasional Airbnb hosting while residing in your primary residence won't trigger the tax.
✓ Long-Term Rental Exemption
Properties rented to tenants on leases of 12 months or longer are not subject to the tax. This exemption is designed to incentivize conversion of vacation rentals to long-term housing, addressing San Diego's housing crisis. A property owner with a Pacific Beach vacation rental could avoid the tax entirely by switching to a traditional year-long lease with a San Diego resident.
⚠ Proposed Additional Exemptions (Under Consideration)
Councilmember Elo-Rivera has indicated openness to additional exemptions, including properties owned by the same family for generations or properties where the owner has recently passed away. Estate settlement exemptions could provide relief during the typically lengthy probate process. Properties undergoing major renovations might also qualify for temporary exemptions, though specific language hasn't been finalized.
The exemption structure reveals the measure's intent: it's not designed to tax San Diegans living in their homes or to penalize landlords providing long-term rentals. It specifically targets investment properties used as vacation rentals or held vacant, which city officials argue contribute to housing scarcity while San Diego's rental occupancy rate hovers at 97%.
Geographic Impact: Pacific Beach, La Jolla, Mission Beach, Ocean Beach
While the Vacation Home Operation Tax applies citywide, its impact will be heavily concentrated in San Diego's coastal communities where vacation rental demand and second-home ownership are highest. Pacific Beach, La Jolla, Mission Beach, and Ocean Beach face disproportionate exposure.
Pacific Beach
Median home price: ~$1.3 million. Walkable beach scene, nightlife, and proximity to attractions make it a short-term rental hotspot. Property owners with two- and three-bedroom condos near Garnet Avenue or along the coast would face $10,000-15,000 annual tax bills.
Tax impact: $10,000-15,000/year typical
La Jolla
Median home price: $2.8-3.2 million. Attracts wealthy second-home owners and luxury vacation rental operators. A typical four-bedroom home would face a $20,000 annual tax, while larger estates could owe $25,000-30,000 or more depending on bedroom count.
Tax impact: $20,000-30,000/year typical
Mission Beach
Beachfront boardwalk properties popular with families and groups. Typically feature three to four bedrooms and generate substantial summer rental income. High concentration of vacation rentals as percentage of total housing stock.
Tax impact: $15,000-20,000/year typical
Ocean Beach
Laid-back, bohemian character attracts different demographics but still supports a robust vacation rental market. Concentrated impacts because vacation rentals represent higher percentage of housing stock compared to inland neighborhoods.
Tax impact: $15,000-20,000/year typical
Potential Domino Effect
If multiple property owners in these coastal neighborhoods simultaneously decide to sell ahead of the March Council vote or June ballot, inventory could surge in specific zip codes, potentially depressing prices temporarily. This "motivated seller" scenario is already being discussed among real estate professionals who follow San Diego's coastal markets.
San Diego's Housing Crisis Context: 97% Rental Occupancy Rate
The Vacation Home Operation Tax doesn't exist in a vacuum. It's San Diego city government's response to a severe housing crisis characterized by extremely low vacancy rates, high rents, and insufficient housing production to meet demand.
Housing Crisis by the Numbers
- 97% rental occupancy rate: Virtually no cushion for residents seeking housing
- 25,200 housing unit shortfall: Current deficit based on long-term targets
- Two-thirds production rate: City permits barely 67% of needed homes annually
Councilmember Elo-Rivera has framed the tax as necessary to preserve San Diego's character as a place where everyday people can afford to live. During the Rules Committee hearing, he questioned whether San Diego will remain accessible to working families or become exclusively a city where only wealthy people can afford to live while everyday people commute in to work.
The housing crisis context explains why the measure requires only a simple majority to pass. Polling suggests substantial public support for measures that address housing affordability, even when they impose new taxes. Property owners affected by the tax represent a small fraction of the electorate—approximately 2% of homeowners—while the broader population struggling with high rents and limited housing options represents a much larger voting bloc.
Comparison to Other California Cities: Berkeley, Oakland, San Francisco
San Diego isn't the first California city to implement a vacant home tax. Berkeley, Oakland, and San Francisco have all enacted similar measures, providing useful precedents for what San Diego property owners might expect if the June ballot measure passes.
| City | Tax Structure | Annual Revenue | Status |
|---|---|---|---|
| Oakland | $3,000-6,000 per parcel | $5.53M average | Active since 2018 |
| Berkeley | $3,000-12,000 per unit (escalating) | Not disclosed | Active since 2022 |
| San Francisco | $2,500-20,000 (sliding scale) | N/A | Halted by court 2024 |
| San Diego | $5,000 per bedroom | $100-135M projected | June 2026 ballot |
Oakland's Mixed Results
Oakland's vacancy tax, approved by voters in 2018, has collected an average of $5.53 million per year in revenue. However, the measure notably has not resulted in a decrease in vacant properties since 2019. This outcome suggests enforcement challenges and that some property owners are willing to pay the tax rather than change property use.
San Francisco Legal Challenge
In November 2024, a California trial court prohibited enforcement of San Francisco's Empty Homes Tax, creating legal uncertainty. The challenge centered on whether the tax violated property rights under California's constitution. If appellate courts determine vacant home taxes violate constitutional rights, San Diego's measure could face similar litigation even if voters approve it.
Financial Analysis: Sell Now vs Hold Through June Ballot
Property owners face a fundamental decision: sell before the March Council vote or June ballot, or hold the property and hope voters reject the measure. Each strategy involves distinct risks and potential outcomes.
| Strategy | Best For | Key Risks | Potential Outcome |
|---|---|---|---|
| Sell before March vote | Risk-averse owners, leveraged investors | Missing appreciation if measure fails | Eliminate tax exposure entirely |
| Hold through June ballot | Confident measure will fail | Tax liability + value decline if passes | Keep property, avoid selling discount |
| Convert to long-term rental | Want to keep property | Lower rental income vs vacation rental | Avoid tax, maintain ownership |
| Cash buyer sale | Need speed/certainty | Accept 70-85% of market value | Close in 7-14 days, immediate liquidity |
The "Sell Now" Strategy: Certainty
Property owners who list and close sales before March 2026 eliminate exposure to the tax entirely, regardless of the ballot outcome. For a three-bedroom Pacific Beach property worth $1.3 million, this might mean accepting current market prices and avoiding a potential $15,000 annual tax liability.
Over a 10-year holding period, avoiding the tax saves $150,000 in cumulative tax payments, not accounting for inflation or potential tax increases.
The "Hold and Hope" Strategy: Risk
If the measure passes, property owners face three negative outcomes simultaneously:
- 1. The immediate tax liability starting in late 2026 or 2027
- 2. Potential property value depression as the market adjusts to the new cost structure
- 3. Increased competition from other owners who also waited and now want to sell post-ballot
Cash Buyers: Speed and Certainty
While traditional sales in San Diego average 80 days from listing to close, cash buyers can complete transactions in 7-14 days. This compressed timeline matters for property owners who decide late in the timeline—perhaps after the February Rules Committee meeting—that they want to sell before the March Council vote.
The pricing trade-off must be acknowledged. Cash buyers typically offer 70-85% of market value. For a $1.3 million Pacific Beach property, this might mean accepting $910,000-1,105,000.
However, if a property owner accepts $100,000 less from a cash buyer but avoids a $15,000 annual tax, the "cost" is recouped after 6.67 years of avoided tax payments.
Political Dynamics: Council Votes and Public Opinion
The Vacation Home Operation Tax's political path hinges on securing five votes from San Diego's nine-member City Council in March 2026 and then winning a simple majority from voters in June. Understanding the political dynamics helps property owners assess likelihood of passage.
Support Indicators
- ✓ Rules Committee 3-1 vote (strong progressive support)
- ✓ General tax requires only simple majority (50%+1)
- ✓ Housing advocates and labor unions support
- ✓ 98% of homeowners exempt (little voter opposition)
- ✓ Framed as addressing housing crisis
Opposition Points
- ✗ Tourism industry concerns (job losses)
- ✗ Legal challenges (SF precedent)
- ✗ Enforcement complexity and costs
- ✗ Property owner testimony
- ✗ Economic impact on hospitality sector
The Rules Committee's 3-1 vote provides initial signals. With the measure's sponsor plus two additional Rules Committee supporters, proponents need only two more votes from the remaining six Council members to reach the five-vote threshold for ballot placement.
Property owner testimony during January-February Rules Committee meetings represents the final opportunity to influence the measure before the March Council vote. Owners emphasizing economic harm, job losses, and enforcement challenges might peel off moderate Council members. However, housing advocates arguing that 10,600 properties sitting vacant or serving tourists while 25,200 housing units are needed will likely outnumber property owner opponents at public hearings.
What Cash Buyers Offer: Speed, Certainty, and Competitive Pricing
For property owners who decide to sell ahead of the March Council vote or June ballot, cash buyers offer distinct advantages over traditional sales, though with trade-offs to consider.
Cash Transaction Benefits
- ✓ 7-14 day closing timeline
- ✓ No appraisal contingency
- ✓ No lender delays or underwriting
- ✓ Funds verified within 48 hours
- ✓ Near-zero fall-through risk
- ✓ Purchase as-is without repairs
- ✓ Flexible closing dates
Traditional Sale Challenges
- ✗ 80-day average closing timeline
- ✗ Appraisal gaps require renegotiation
- ✗ Lender underwriting delays common
- ✗ Buyer qualification issues terminate deals
- ✗ 15-20% financing fall-through rate
- ✗ Pre-sale repairs required
- ✗ Extended carrying costs
Speed Example: March Timeline
Properties listed in March 2026 for traditional sale would need to find a buyer within 1-2 weeks, complete financing in 30-34 days, and close by late April—assuming no delays, inspection issues, or appraisal gaps. Cash buyers eliminate this risk entirely with guaranteed 7-14 day closings.
Cash buyers serve particular property owner profiles well: investors with multiple properties who want to quickly liquidate some holdings, out-of-state owners who don't want to manage a listing and showings from afar, inheritors who want fast estate settlement, and owners facing financial pressure who need immediate liquidity.
Frequently Asked Questions
How do I know if my San Diego property will be taxed $5,000 per bedroom?
Your property will be subject to the Vacation Home Operation Tax if it meets two criteria: (1) it's not your primary residence, and (2) it's either rented as a full-time short-term vacation rental (Airbnb, VRBO, etc.) or held vacant without a long-term tenant. Properties that qualify for San Diego County's Homeowners' Exemption—requiring the home to be your principal place of residence on January 1st—are automatically exempt. Properties rented to tenants on 12-month or longer leases are also exempt. The city estimates approximately 10,600 properties meet the taxable criteria: roughly 5,600 short-term vacation rentals and 5,000 vacant second homes.
What is the timeline for the June 2026 ballot measure?
The Vacation Home Operation Tax is progressing on a compressed timeline. The Rules Committee voted 3-1 on October 22, 2025, to begin drafting the measure. The committee will reconvene in January or February 2026 to review completed fiscal and operational analyses from city staff. The full nine-member City Council must then vote by early March 2026 to officially place the measure on the June 2026 ballot. If approved by the Council, San Diego voters will decide the measure's fate in June. As a general tax requiring only a simple majority (50% plus one vote) to pass, implementation could begin in late 2026 or early 2027 if voters approve it.
Can I avoid the tax by renting my vacation home long-term?
Yes. Properties rented to tenants on leases of 12 months or longer are explicitly exempt from the Vacation Home Operation Tax. This exemption is designed to incentivize conversion of vacation rentals to long-term housing, addressing San Diego's housing crisis with its 97% rental occupancy rate. For a property owner with a three-bedroom Pacific Beach vacation rental currently generating perhaps $75,000-90,000 in gross annual income, converting to a long-term rental might yield $60,000-72,000 annually (assuming $5,000-6,000 monthly rent), but with significantly lower operating expenses and no $15,000 annual tax.
Should I sell now or wait to see if the ballot measure passes?
This decision depends on your risk tolerance, financial situation, and belief about the measure's likelihood of passage. Selling before the March 2026 Council vote eliminates tax exposure entirely regardless of the ballot outcome—you avoid the potential $15,000-25,000 annual tax for a typical three- to four-bedroom coastal property. However, you might miss appreciation if the measure fails. Holding through the June ballot works if you're confident voters will reject the measure, but carries substantial risk: if it passes, you face the tax liability, potential property value decline, and competition from other owners who also waited and now want to sell.
How does this compare to San Diego's existing short-term rental regulations?
San Diego's existing short-term rental regulations cap licenses and impose transient occupancy taxes (TOT) on vacation rentals, but they don't directly tax vacant properties or impose per-bedroom fees. The Vacation Home Operation Tax represents a fundamentally different approach: it's not a tax on rental income but rather an annual per-bedroom fee on property ownership itself when the property isn't a primary residence or long-term rental. The two systems would coexist—vacation rental operators would pay both TOT on rental income AND the $5,000-per-bedroom annual tax if the measure passes.
Are there exemptions for properties under renovation or estate settlement?
While the measure's final language hasn't been completed, Councilmember Sean Elo-Rivera has indicated openness to additional exemptions beyond the primary residence and long-term rental exemptions. Specifically, he's mentioned properties owned by the same family for generations and properties where the owner has recently passed away as potential exemption categories. Estate settlement exemptions would provide relief during the typically lengthy probate process. These implementation details will be finalized as city staff completes the measure's language in January-February 2026 ahead of the March Council vote.
What is the $135 million revenue used for?
The Vacation Home Operation Tax would generate an estimated $100-135 million annually that would flow into San Diego's general fund. Because it's structured as a general tax rather than a special tax, the revenue isn't earmarked exclusively for housing—it can support any city services including police, fire protection, libraries, parks, housing programs, and infrastructure improvements. The general fund structure requires only a simple majority (50% plus one vote) to pass, whereas a special tax earmarked specifically for housing would require a two-thirds supermajority.
How quickly can cash buyers close on affected properties?
Cash buyers can close on San Diego properties in 7-14 days, and some can complete transactions in less than a week if the title is clear. This speed dramatically exceeds traditional sales, which average 80 days from listing to close in San Diego. For property owners who decide late in the timeline—perhaps after the February 2026 Rules Committee meeting—that they want to sell before the March Council vote, a cash buyer might be the only viable option. Cash buyers eliminate financing contingencies, skip appraisals, and typically purchase properties as-is without requiring repairs.
Will the tax affect Pacific Beach and La Jolla properties more than other areas?
Yes, the geographic impact will be heavily concentrated in San Diego's coastal communities where vacation rental demand and second-home ownership are highest. Pacific Beach, La Jolla, Mission Beach, and Ocean Beach face disproportionate exposure because vacation rentals represent a higher percentage of housing stock in these neighborhoods. Pacific Beach's walkable beach scene and $1.3 million median home price make it accessible to vacation rental investors. La Jolla's luxury market ($2.8-3.2 million median) attracts wealthy second-home owners. Coastal neighborhoods likely account for 60-70% of the 10,600 affected properties.
What happens if San Francisco's legal challenge invalidates that city's vacant home tax?
San Francisco's Empty Homes Tax was halted by a California trial court in November 2024, creating legal uncertainty for all California vacant home taxes. If appellate courts ultimately determine such taxes violate constitutional property rights, San Diego's measure could face similar litigation even if voters approve it in June 2026. This legal risk is significant for property owners evaluating whether to sell or hold. The San Francisco case will likely be resolved through California's appellate courts in 2026-2027, potentially after San Diego's June ballot but before implementation begins.
Conclusion: Act Deliberately in the Next Three Months
San Diego's proposed Vacation Home Operation Tax represents the most significant policy intervention targeting vacation rentals and vacant properties in the city's recent history. With approximately 10,600 properties facing potential annual tax bills of $15,000-25,000 for typical three- to four-bedroom homes, the measure creates genuine urgency for property owners in Pacific Beach, La Jolla, Mission Beach, and Ocean Beach.
The compressed timeline—Rules Committee review in January-February 2026, full Council vote in March, and voter ballot decision in June—gives property owners just a few months to evaluate options. Those who want certainty can sell before the March Council vote, eliminating tax exposure entirely. Those willing to accept risk might hold through June hoping voters reject the measure. Converting vacation rentals to long-term leases offers a middle path that avoids the tax while maintaining ownership.
The financial math is straightforward but consequential. A three-bedroom property facing a $15,000 annual tax accumulates $150,000 in tax liability over 10 years—roughly 11.5% of a $1.3 million property's value. For leveraged investors operating on thin margins, this expense could render properties cash-flow negative and force sales.
Property owners facing this decision should act deliberately but not panic. Gather data about your property's likely tax liability, evaluate your financial situation and risk tolerance, consult with tax professionals about deductibility, and monitor the January-February Rules Committee meetings for final measure language. Whether you choose to sell, hold, or convert to long-term rental, make an informed decision based on your specific circumstances rather than reacting to headlines.