Thinking about turning a Gilroy property into a short‑term rental or buying a home with hosting in mind? Before you list that spare room, there are local rules, taxes, and risks that can affect your plan and your bottom line. You want clear steps and straight answers so you can host confidently and avoid costly mistakes. In this guide, you’ll learn what counts as a short‑term rental in Gilroy, how taxes work, what is not allowed, and the key risks to manage. Let’s dive in.
What counts as a short‑term rental
Short‑term rentals in Gilroy generally mean stays of fewer than 30 days. For these bookings, the City requires you to collect a 9 percent Transient Occupancy Tax plus a 2 percent Tourism Business Improvement District assessment from guests. That adds up to 11 percent on top of the nightly rate. You can review rates and forms on the city’s Transient Occupancy Tax and TBID page.
Registration and local taxes
Lodging registration and business license
If you rent for fewer than 30 days, you must register as a lodging operator with the City and file periodic returns. The City also requires businesses operating in Gilroy, including home‑based businesses, to hold a business license. Check the City’s Business Licenses page for how to apply and the Lodging Operator Registration form for required details like a local emergency contact.
- City TOT and TBID overview and forms: City of Gilroy Transient Occupancy Tax and TBID
- Business license information: City of Gilroy Business Licenses
- Lodging Operator Registration form: Gilroy registration form
Collecting and remitting
You are expected to add the 11 percent tax to the guest invoice, keep clear records, and remit per the City’s schedule. The Finance Department provides the return form and filing instructions. Keep copies of every return and payment for your records.
If your property is outside city limits
Hosting in an unincorporated part of Santa Clara County follows County rules. The County has its own registration and Transient Occupancy Tax program. Verify your parcel’s jurisdiction and, if unincorporated, register with the County’s Department of Tax and Collections.
- County information: Santa Clara County Transient Occupancy Tax
ADUs and the 30‑day rule
Gilroy’s municipal code is clear: you cannot rent an accessory dwelling unit or junior ADU for fewer than 30 days. ADU owners must record a deed restriction acknowledging this minimum. If your plan relied on listing an ADU on a nightly basis, you will need to rethink that strategy or adjust to 30‑day minimum stays.
- Local code reference: Gilroy ADU regulations
Will a platform collect the tax for you
Some platforms collect and remit occupancy taxes only in certain places. Do not assume they collect for Gilroy or for your specific listing. Check your platform’s tax settings and confirm with Gilroy Finance. Even if a platform collects, you may still need to register and file returns.
- Platform guidance: Airbnb tax collection overview
Insurance and liability basics
Standard homeowners insurance often excludes business activity like frequent short‑term rentals. You may need a dedicated STR policy, a landlord policy, or an endorsement, plus consider an umbrella for extra liability. Platform protections can help but have limits and exclusions, so they are not a full replacement for proper coverage.
- Coverage overview: Does homeowners insurance cover STRs
HOAs and CC&Rs you must review
If your property is in an HOA, the governing documents may limit or prohibit rentals of 30 days or less. California Civil Code section 4741 allows associations to restrict transient or short‑term rentals under 30 days. Before you list, review the CC&Rs, any amendments, and board rules for rental limits or registration steps.
- State law reference: California Civil Code 4741
Common enforcement risks
Neighbor complaints often center on noise, parking, trash, and over‑occupancy. The City can use nuisance rules and fines for repeated issues. Gilroy’s lodging registration asks for a local emergency contact, so have someone nearby who can respond quickly. Clear house rules and a rapid response plan reduce problems and protect your permit status.
- Registration detail: Gilroy lodging operator form
Federal income tax basics for hosts
Rental income is generally taxable. The IRS explains one notable exception: if you use the home as a residence and rent it for fewer than 15 days in the year, you typically do not report the rent. Otherwise, report income and deductible expenses, usually on Schedule E. If you provide substantial services like a hotel, your activity could be treated as a business.
- IRS guidance: Publication 527, Residential Rental Property
Your step‑by‑step checklist
- Confirm city vs county jurisdiction for your parcel, since that determines which TOT rules apply.
- Review Gilroy’s ADU rule if you planned to host in an ADU. Nightly stays are not allowed.
- Read your HOA’s CC&Rs for any short‑term rental restrictions and registration steps.
- Obtain a Gilroy business license and complete the Lodging Operator Registration. Set up TOT and TBID collection.
- Check your platform’s tax collection settings and verify with the City or County.
- Call your insurer and secure coverage that matches STR activity. Consider an umbrella policy.
- Set clear house rules covering quiet hours, parking, trash, and maximum occupancy. List a local emergency contact.
- Keep detailed records of nights, income, expenses, and taxes for City, State, and IRS filings.
- Watch for local updates. Bay Area cities adjust STR rules often.
When to hit pause
If anything here conflicts with your plans or your HOA’s rules, pause and verify before taking bookings. Small missteps can lead to back taxes, fines, or insurance gaps. A quick check with the City, County, your CPA, and your insurer can save you time and money.
Ready to evaluate a Gilroy property for short‑term or 30‑day plus rental potential, or want help modeling returns and next steps? Reach out to Mariano Peralta for local, hands‑on guidance in English or Spanish.
FAQs
What taxes apply to short‑term stays in Gilroy under 30 days
- Gilroy lists a 9 percent Transient Occupancy Tax plus a 2 percent TBID assessment that you collect from guests and remit per City instructions.
Can I rent my Gilroy ADU on a nightly basis
- No, Gilroy’s code prohibits renting ADUs and JADUs for fewer than 30 days, and owners record a deed restriction acknowledging this rule.
Do I need a business license and a city registration to host
- Yes, Gilroy requires a business license and a lodging operator registration with periodic tax filings for short‑term rentals.
Will Airbnb or VRBO handle the occupancy tax for my Gilroy listing
- Sometimes, but not always, so verify platform collection for your listing and confirm with the City or County because you remain responsible for compliance.
How does the IRS treat my short‑term rental income
- If you rent the home fewer than 15 days while using it as a residence you generally do not report the income, otherwise report rental income and allowable expenses per IRS Publication 527.
