Short-Term Rentals vs. Long-Term Rentals

When most people think of renting, they picture tenants with a year-long lease. Short-term rentals (like Airbnb or VRBO) are very different. Guests may stay just a weekend, a week, or perhaps a month. Long-term rentals, on the other hand, last for months or years and usually involve unfurnished spaces, tenant protections, and stable income.

Because short-term rentals operate more like vacation stays, the rules for taxes, expenses, and even insurance can be quite different from traditional renting.

How Taxes Work

Tax rules for short-term rentals can be tricky, and many owners get them wrong. Whether your rental income is treated like normal rental income or like business income depends on three main things:

• Length of stay – If most guests stay a week or less, tax law may not treat it as a typical rental.
• Services you provide – If you offer extras such as daily cleaning, meals, or concierge-type help, the government may view your property as more of a hotel.
• Your involvement – If you personally handle bookings, guest messages, cleaning, and repairs, you’re considered much more active than someone who hires a manager to do it all.

In other words:  If you mainly provide the space plus basics like Wi-Fi and cleaning between guests, you’ll usually report the income like a rental property.  If you run it like a mini-hotel with daily services and staff, your income is treated as business income, which can mean extra taxes.

Active vs. Passive Income

Once the tax rules are sorted, the next question is whether your rental counts as “active” or “passive.”

• Passive: You aren’t very involved and let a property manager handle most tasks. Losses (spending more than you earn) may be harder to use to reduce your taxes.
• Active: You manage the property yourself—responding to guests, arranging cleanings, making repairs. In this case, losses are easier to use to offset other income.

Think of it this way:  the more hands-on you are, the more likely your rental is considered active.

Vacation Homes You Also Use

Things get more complicated if the property is a vacation home you also use. You’ll need to split expenses between personal use and rental use.

For example, if you use the home yourself for one month and rent it for three months, about 75% of your expenses may be deductible as rental costs.

There’s also a special rule: if you rent the property out for 14 days or fewer in a year, you don’t have to report the income at all.  But in that case, you also can’t deduct the expenses.

Keep Good Records

Whether you’re renting full-time or part-time, it pays to treat your property like a business. That means:

• Tracking how many days it’s rented vs. how many days you use it yourself.
•  Keeping receipts for all expenses—repairs, supplies, services.
• Logging the hours you spend managing the property.

Having solid records can protect you if the IRS ever asks questions.

Be Mindful of Local Rules

Your city or county may have its own requirements for short-term rentals. Some places require permits, special “hotel” or “occupancy” taxes, or limit how many nights you can rent out your property. It’s important to check these rules before you start—violations can result in fines or restrictions on your ability to host.

Insurance Considerations

Standard homeowner’s insurance often doesn’t cover short-term rentals. If you plan to host guests, talk to your insurance company or look into a special policy for vacation rentals. This ensures you’re protected if something goes wrong during a guest’s stay.

Final Thoughts

Renting out your home can be a smart way to earn extra income, but it’s not as simple as listing it online. How long guests stay, what services you provide, and how involved you are all affect how your rental is taxed and regulated.

• Before you jump in, ask yourself:
• Am I just offering a space, or will I provide hotel-like extras?
•  Will I manage the property myself or hire someone else?
•  Do I plan to use the property personally as well?
• What local rules or permits apply where I live?

Answering these questions—and talking to a tax or financial professional—can save you from costly surprises and help make your rental experience both smooth and profitable.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.  Please consult your financial, tax, and estate planning professional regarding your specific situation.

While Prop 19 was originally promoted as a way to help seniors and wildfire victims relocate without tax penalties, it also reduced the long-standing tax benefits for inherited properties. Over the past five years, the law has evolved further through inflation adjustments and other procedural updates. Below is a summary of what you need to know about Prop 19 today and how recent changes may affect your property and estate planning strategies.

The Background: Why Prop 19 Was Passed

Before 2021, California property taxes were largely governed by Proposition 13, which capped annual property tax increases at 2% until the property was sold or transferred. This system kept taxes predictable but also created wide differences in rates between neighbors, where longtime owners often paid far less than recent buyers.  There were two key issues that motivated Prop 19:

1.    Inheritance Loopholes:

Under previous rules, children could inherit their parents’ property—whether a home, rental, or vacation house—and keep the parents’ low property tax base, even if they never lived in the property. Many inherited homes became investment properties taxed far below market value, costing counties and schools millions in potential revenue.

2.    Barriers to Moving for Older Homeowners:

Seniors often felt “locked in” to their homes because moving meant losing their low property tax assessment. This discouraged downsizing or relocating closer to family.

Proposition 19 aimed to close these gaps by limiting inherited property tax benefits and granting tax portability to certain homeowners; with the added benefit of directing the increased revenue to wildfire response and local government services.

Core Provisions of Proposition 19

The law introduced two significant reforms:

1. Tax Portability for Seniors, Disabled, and Disaster Victims

• Homeowners age 55 or older, severely disabled, or affected by a natural disaster may transfer their existing property tax base to a new home anywhere in California.
• This benefit can be used up to three times instead of just once.
• If the new home is more expensive, only the price difference is reassessed.

This provision has encouraged moving for older homeowners and those rebuilding after disasters, making it easier to move without a sharp tax increase.

2. New Limits on Parent-to-Child (and Grandparent-to-Grandchild) Transfers

• Children now keep their parents’ low property tax assessment only if they make the inherited home their primary residence.
•  Even then, only up to a certain amount of the original assessed value is excluded from reassessment. Any excess is taxed at current market rates.
• Vacation homes, rental properties, and investment real estate no longer qualify for the full exclusion.

These inheritance limits dramatically reduced the number of properties passed down with minimal tax impact, increasing local tax revenues.

What’s Changed Since 2021?

Since its implementation, Prop 19 has undergone several important updates to refine how the law is applied.

1. Inflation Adjustments to the Transfer Exclusion Cap

One of the most notable changes is the periodic adjustment to the cap on the parent-child (and grandparent-grandchild) exclusion. Originally set at $1 million in 2021, this cap is now indexed for inflation:

• For transfers between Feb. 16, 2023 and Feb. 15, 2025, the cap was $1,022,600.
• For transfers between Feb. 16, 2025 and Feb. 15, 2027, the cap has been raised to $1,044,586.

This means heirs can exclude up to $1.044 million above the home’s taxable value from reassessment when they inherit and move into the property as their residence. Any value above this threshold is subject to current market reassessment.

2. Expanded Small Estate Rules

New legislation has expanded California’s small estate procedures for decedents who pass away on or after April 1, 2025. Estates valued at up to $750,000 (for primary residences) can now use simplified affidavits to avoid full probate.

While this change is separate from the core provisions of Prop 19, it complements estate planning strategies by making property transfers for smaller estates less burdensome.

3. Increased Usage by Older Homeowners

Data since 2021 shows a dramatic rise in the number of Californians age 55+ using the portability benefit. In the Bay Area, for example, annual requests to transfer property tax bases jumped from around 1,000 pre-Prop 19 to over 3,000 by 2023. This has allowed many retirees to move closer to family, downsize, or relocate to new areas without tax penalties.

4. Decline in Parent-Child Exclusions

On the other hand, the number of parent-child property transfers receiving favorable tax treatment has dropped sharply. In the same Bay Area counties, approvals fell from roughly 16,800 in 2020–21 to around 4,600 by 2023–24. This shift reflects the stricter requirements and reassessment rules under Prop 19.

Why These Changes Matter To You

The adjustments to Prop 19 underscore the importance of reviewing your property and estate plans regularly for the following reasons:

• Inheritance Planning Needs Reevaluation:  Families can no longer assume inherited properties will retain low taxes unless strict conditions are met. Without planning, heirs may face significant property tax hikes.
• Opportunities for Seniors:  If you are 55 or older and considering a move, Prop 19’s portability provisions may make relocation far more affordable.
• Tax Implications Continue to Evolve:  Inflation-indexed caps and procedural changes mean property transfers require careful timing and documentation to optimize tax outcomes.

To Summarize

California’s Proposition 19 fundamentally changed property tax rules, balancing homeowner mobility with increased revenue for public services. Since 2021, updates such as the inflation-adjusted transfer cap and expanded small estate rules have further refined its impact.  For homeowners and families, understanding these provisions is critical to avoiding surprises and maximizing opportunities. Whether you are planning to downsize, relocate, or transfer property to the next generation, now is the time to review your options.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.  Please consult your financial, tax, and estate planning professional regarding your specific situation.

#1:  Background on Proposition 19

One of the most significant purchases you will make in your lifetime is the purchase of your home.   While you own your home, you will have to pay property taxes to the county where you live.  The initial property tax rate that you pay is based on approximately 1% of your home’s assessed value and is increased 2% per year.   (Keep in mind that the assessed value of your home is generally based on the purchase price but could be higher or lower depending on the “assessment” made by the county’s municipal property tax assessor.)

Now, if you purchased your home 20 years ago your annual property tax payments are probably pretty low compared to what new home owners would pay today.  The average price of a home in the San Francisco Bay Area in the year 2000 was approximately $500,000 so annual property taxes were about $5,000.   Today, that same home would cost approximately $1,600,000 and annual property taxes would be about $16,000.  A difference of $11,000 per year!  

The rising costs of homes in the Bay Area over the past 20 years has made the increase in property tax payments a major factor in deciding to buy another home.  Prior to the passage of Proposition 19, you could potentially qualify for a one-time tax property tax break if you sold your home and purchased a new one.  If you were at least 55 years old, purchased a home in the same county as your previous home, and the value of your new home was of equal or lesser value to your existing home, you would be allowed to transfer your original home’s assessed value to your new home and not incur an increase in property tax payments.  

For example, suppose you purchased your original home in the year 2000 and the assessed value of the home is now $475,000.  Your annual property tax payment would be about $4,750 today.  If your original home was currently valued at $1 million and you bought a new home for $1 million, you could transfer your original home’s assessed value of $475,000 to your new home and incur no changes in annual property tax payments. (Note: A Second exemption is also granted to severely disabled persons over 55 years old).

However, statistics show that when people move, they often move to a new county.  Secondly, most people will purchase 2 to 3 homes in their lifetimes.  Thirdly, there was a good chance that the assessed value of your new home would be much more than your current home’s assessed value.  Thus, prior to Prop 19, you were more likely to face an increase in your property taxes when you moved.   As a result, you see more people holding on to their homes and passing it on to their children.  The children would inherit the home with the same assessed value as their parents and thus, see no increase in their property taxes.

The old property tax law also created unintended negative consequences for people who tragically lost their homes to wildfires.  They were forced to move into a new home against their will, face undue financial hardship, plus have the burden of having to pay higher property taxes on a more expensive home.

#2:  Proposition 19 is a positive for older homeowners

With the passage of Prop 19, people who are either age 55 years or older, has a severe disability, or lost their home to a wildfire, may now blend the assessed value of their existing home to their new home and therefore realize significant property tax savings.  Secondly, these same people can transfer the tax assessment three times in their lifetimes instead of just once.  Thirdly, people can move anywhere in California and receive favorable property tax treatment.  They don’t have to stay in their own county.

For example, suppose a retired couple in their early sixties, owns a home in San Francisco County with an assessed value of $800,000 and pays annual property tax payments of $8,000 per year.  The current market value of their home is $1,200,000.  They wish to sell their old home and buy a home in Los Angeles County worth $1,500,000.   The assessed value of their new home will be calculated like this:

This couples will save $4,000 a year in property taxes because instead of paying $15,000 in annual property taxes under the old rule, this couple would pay $11,000 a year.

#3:  Proposition 19 is a negative for children who inherit homes

While Prop 19 can potentially help older homeowners save money on property taxes when moving into a new home, it increases property taxes on children who inherit their parents’ home.  Under the old rule, if a child inherited their parents primary residence, there was no change in the assessed value of the home and the child could live in it or rent it out as they wished.    For example, if a child inherits a home in San Francisco with an assessed property tax value of $500,000 but is now valued at $3,500,000, the child would incur no increase in property taxes and the annual property tax payment would remain at $5,000.  (This is one of the major reasons why homes in high priced communities tended to stay within the family).  If the child also inherited a second home which was other than a primary home (rental, vacation home, commercial property, etc.), the home was reassessed but up to $1 million was excluded from the reassessed value.  For example, if the second home’s current fair market value is $1,350,000, then the reassessed property tax basis would be $350,000 ($1,350,000 - $1,000,000).

Beginning on February 16, 2021, a child who inherits a home and decides to use it as their primary residence, the home will be subject to a reassessment with $1 million being excluded from the property tax basis.   Using the  first example above, if an inherited home’s fair market value is $3,500,000, the reassessed property tax basis would be $2,500,000 ($3,500,000 - $1,000,000).  The annual property tax payment would be about $25,000 under the new law versus $5,000 under the old law.

On the other hand, if the child chose not to live in the home and instead rents it out, the home would be considered “other than a primary home” and it would lose the $1 million exclusion and the inherited home’s assessed value would be the the full fair market value of $3,500,000.  The annual property tax would increase to $35,000 versus $5,000 under the old law.  As you can see, the annual property tax obligation would now be very significant regardless if the child lived in an inherited home or rented it out.  Rather than keep the home, a more affordable option could be to sell it and avoid the high annual property tax payment.

To preserve the existing property tax breaks under the old rules, some people are transferring their properties into an irrevocable trust.  Time is running out to do this, but If you wish to explore this option, please consult your Estate Planning attorney and your tax professional.

In summary, the winners of prop 19 are people over the age of 55, disabled people, and those impacted by wildfires in California. They can now move to a new home anywhere in California and know that they will not pay as much in property taxes as they would have under the old rules.   However, the losers are children who inherit a home as they will certainly have to pay significantly more in property taxes. The biggest winners though will be the real estate industry as more people will be inclined to sell their homes under this new law.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.  Please consult your financial, tax, and estate planning professional regarding your specific situation.

Tip #1: Fill Up Your Emergency Fund

First things first: if you don’t have a dedicated emergency fund, it’s time to start one. And if you’ve been slowly draining your fund for non-emergency spending, focus on filling it back up. While your insurance may cover the damage done by whatever disaster has just occurred, it could be a little while until you see any money coming your way. In the meantime, you could be stuck paying for nights in a hotel, meals for your family, gas, medical bills and other expenses. Depending on the disaster, your place of work may have been affected as well, meaning you could even be out of work for an extended period of time.

Tip #2: Prepare For Unexpected Expenses

Speaking of keeping your emergency fund full, a natural disaster can incur unexpected, and often costly, extra expenses. If a hurricane is nearing the coast, it’s not out of the question to see hotels inland raise their prices. The same goes for gas, food and water. With the rise of demand can come a surge in pricing. In addition, if you’re making claims through your insurance, you could expect costly deductibles. And if a power surge occurred, your appliances may need to be replaced. Together, these extra expenses can add up quickly.

Tip #3: Keep Cash On Hand

It’s generally a good idea to keep a stash of cash on hand, but it’s especially important if you’re preparing for the possibility of a natural disaster. Whether you’re facing a blizzard, hurricane or tornado, your town or city could easily go days or weeks without power. That means merchants in your area may be without power as well, which could make them cash-only businesses for the time being. Keeping some cash on hand (smaller bills are usually preferred) could allow you to still purchase essentials including food, water and shelter.

Tip #4: Assess Your Insurance Policies

If we asked you to list off exactly what is covered by your insurance policies, could you? If you’re like most, probably not. But trying to make a claim with your insurance company days after a natural disaster has occurred is not the time to learn that your property wasn’t covered. Instead, take the time well-before a natural disaster strikes to discuss with your partner and your insurance provider what your homeowners or other insurance policy protects. Together, you can discuss any additional coverage or changes that could help keep you and your belongings protected in the future.

Tip #5: Always Keep Records Of What You Own

Once you’re sure your insurance policy has you covered, you need to be ready to make a claim at any time. That means keeping accurate records of what you own, what you paid and how much it’s worth. Keep a spreadsheet, photos or video of your current valuables as well as their cost price and current value. This can help to keep the claims process moving when it comes to getting reimbursed for your lost possessions. Try to save digital copies outside of your house in the event your home or files are destroyed due to the natural disaster. This could include keeping digital records in the cloud or physical copies in a safety deposit box or stored at a relative’s house.

Tip #6: Set Up Autopay

We’ve already discussed the extra expenses you may want to prepare for when recovering from a natural disaster. But one extra expense you shouldn’t have to worry about? Late fees. Setting up autopay on your credit card, car payment, cable bill, mortgage or other ongoing expense is one way to avoid missed payments in the wake of a natural disaster. Because the last thing on your mind when a natural disaster strikes is paying the cable bill, and understandably so. Autopay can make life easier any day of the week, but it can also mean one less thing on your plate after a disaster occurs and your world gets a bit more chaotic.

No matter where you live, you just never know when disaster may strike. And as you’re left with the emotional turmoil of putting the pieces of your life back together, it’s important to know that you’re financially well-grounded. Use these six tips above well before a natural disaster occurs to help keep you and your family financially prepared for the unexpected.

1 https://www.bankrate.com/banking/savings/financial-security-january-2019/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Things to Know Before Buying a Timeshare

1. Timeshares are Not Investments

No matter what anyone tells you, don't buy a timeshare in hopes that you can resell it in the future for a profit. That is almost never the case. Timeshares typically depreciate in value over time, and you should only purchase one if you intend on using it for yourself or your family. 

2. Shop Around

Purchasing a timeshare from the developer is almost always the most expensive option. You can most likely get a much better deal on the price of a unit by buying it directly from a previous owner. There are lots of sites online which resell used timeshares. If you decide to go this route, you should be extra careful about what you are buying and should never depend on the information that the seller provides. Always check with the property management for verification before completing a deal. 

3. Know What You Are Really Purchasing

It can be confusing to determine your exact benefits when it comes to timeshares. Unfortunately, many sellers of timeshare properties use high-pressure sales tactics designed to encourage people to make hasty decisions which discourage buyers from completely understanding the transaction. Before purchasing a timeshare, you need to know the complete terms of the sale. For instance, are you purchasing a timeshare which you can resell in the future or are you buying a right-of-use property which means you can't resell it? You will also need to know if you must use the property the same week each year (fixed) or if you can change the week each year (floating). Finally, you should be aware if you can rent out your timeshare week and if you must pay any additional fees if you choose this option in the future. 

4. Understand Reoccurring Fees

The purchase price for a timeshare is to just get in the door, but there is an ongoing cost of ownership. The significant yearly cost is maintenance. Never purchase a timeshare without knowing the current maintenance fee for the unit and when and how you must pay the bill. Ask the property manager for a history of the maintenance fees for at least the last five years to get an idea of yearly increases since most will increase yearly. Besides maintenance fees, special assessment fees can occur when the property needs a major renovation. Be aware of any upcoming assessment fees in the future especially if you are purchasing a used timeshare. 

5. Know How Healthy the Community Is

Make sure the property you are considering is thriving. One of the best ways of checking the financial well-being of a community is to request information on how many owners of other units are behind on maintenance payments. This information can help you gauge the satisfaction level of the other owners and provide clues to broader issues. You should also ask for information on the total occupancy of the property. Properties with a low-occupancy rate will mean you may be responsible for higher fees to cover the total operating costs. If the community balks at providing any information, it may be a sign that you should choose a different option. 

6. Have an Exit Strategy

Things change, and there will probably come a time when you won't use your timeshare. Consider how you will sell your unit in the future to avoid being stuck with a property you no longer want it. 

_{This content is developed from sources believed to be providing accurate information.   It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.}

http://www.realtor.com/advice/buy/home-buying-process/

I spoke with Spiro Hishmeh who is a mortgage banker and broker with Premier Lending Inc. who offered me his perspective on the mortgage loan process. He has been in the mortgage loan business for twenty years and has seen it all. Spiro says that If you want to get a general sense of what you could afford but are not yet certain when you plan to move, you should get pre-qualified for a mortgage loan.

This is a relatively simple process where you would provide the mortgage company your credit score, income, debts, and employment history. The mortgage company could then calculate how much of a mortgage you could potentially qualify for. With this information, you could narrow down the price range of homes and geographical area.

Once you know with certainty where you want to live, when you want to move, and how much cash down payment you could afford, Spiro suggests that you should apply for pre-approval for a home mortgage loan.

Being pre-approved for a home loan is a lengthier process as you are officially applying for a mortgage loan without an actual home specified on the loan. If you can’t find a home within 120 days, the loan will expire and you may have to start the process over again. An offer to purchase a home with a pre-approved loan lets the seller know you are committed and they will take your offer more seriously than an offer with no pre-approval. In this environment of multi-offer bids, it is pretty much a necessity to be pre-approved for a home loan before making an offer on a new home. 

With that said, how do you go about getting pre-qualified or pre-approved for a mortgage loan? Well, you will need to go through a mortgage lender. The challenge is that there are many lenders to choose from.  Mortgage loans are sold through thrift institutions, commercial banks, mortgage banks, credit unions, and mortgage brokers.

It can get confusing or even intimidating trying to decide which direction to turn. Spiro says that people tend to go to the banks or credit union where they have an existing relationship first because it is the easiest option. However, this may not necessarily be the best option, especially if you are not considered a strong candidate for a home loan at your banking institution. 

Banking institutions tend to have more conservative lending programs and less mortgage products available. Therefore, their lending criteria is much stricter. Mortgage brokers can be a better option for those of you who might not qualify for a home loan at the larger banks. They act as the middleman between the banks and the buyers and can offer you several mortgage loan options designed to fit your financial situation. Over the years, Spiro has worked with many customers who went to their bank first but were either turned down for a mortgage loan or could not qualify for the best mortgage loan at their bank. 

Regardless of whether you go to bank or mortgage broker, Spiro says that there are three basic criteria for securing the best mortgage loan:

1. Debt as a percentage of your income – the lower the better
2. Credit score – the higher the better
3. Down Payment- the higher the better 

As far as finding the right Mortgage Lender for you, Spiro offers 3 great suggestions:

1. Obtain quotes from at least 3 different mortgage lenders and compare prices as no two loans are alike.Take the time to understand all of the fees associated with the loan.
2. Interview mortgage lenders and ask as many questions as possible to determine if they understand your unique situation and are problem solvers. If they seem pushy or aren’t listening to you, follow your instincts and move on. 
3. As with any service related transaction, referrals are the best place to start. Ask your realtor, friends, or family who they have worked with in the past and if they were satisfied with the service they received.

 For more information on how to shop for the best mortgage loan for you, please go to the Federal Trade Commission website link: https://www.consumer.ftc.gov/articles/0189-shopping-mortgage. Be sure to print out the Mortgage Shopping Worksheet.