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Owning a rental or vacation home is an excellent way to earn a steady monthly income. Florida has specific tax laws that every investor should know about when income is generated from investment properties. Apart from federal taxes, the payment of state taxes is a separate requirement. Not paying the correct amount of taxes or filing too late can be a hard lesson learned when penalties are incurred. While it is always best to consult with an accountant or tax professional that can provide tax advice, knowing the basics of how Florida taxation works is helpful.
Sales and Use Taxes for Property Owners The Florida Department of Revenue has recently approved changes to the taxes charged on rental properties and vacation homes. The rise in distressed properties and foreclosures has created the need for updated taxation. Every Florida county handles local taxes differently and one county where you own property may differ from another.
The types of local taxation include:
• Discretionary Sales Surtax
• Tourist Development Tax
• Tourist Impact Tax on Transient Accommodations
• Local Option Tax
• Convention Development Tax
Each county tax collector or assessor can provide further information to help you understand if a rental or vacation home that you own should pay one or more local taxes. If you rent out your property through a property management company, it is helpful to find out if the company does or does not provide local taxation filing assistance to you.
Additional Rental and Vacation Home Taxes Florida law classifies rental properties and vacation homes as transient accommodations. Renting or leasing these properties generally comes with a six percent tax on revenue earned. The due dates for reporting this tax is the first day of every month after the rental income is received. Late penalties can be assessed at $50 if the payments are not filed and received on time with Florida Department of Revenue.
A tangible personal property tax could also be assessed depending on the use of your rental property. The annual filing is due on April 1st for the previous taxable year. The assessed value of the property, appliances used by renters, improvement made to the property and other personal property used during the year are examples of what you may need to report.
Tax Exemptions for Rental Property Owners There are loopholes in the law that could make your rental property exempt from certain types of taxation. If your rental property includes a lease extending past six months, you might be exempt from taxation after the first six months. A good property management company can help explain the type of taxes that could be assessed on your property and what exemptions you could qualify to receive. Part of the research that you perform as a real estate investor should include information about taxation and filing dates that are required to avoid unnecessary tax penalties. Maximizing your deductions, qualifying for exemptions and filing on time can help you keep a majority of your investment property income.
Want to learn more about investing in rental properties passively? Watch our free webclass and discover the 3 keys that every investor should know before they make their first rental property investment. If you have any questions or if you would like to speak with a member of our team, please fill out the form or give our office a call at (904) 677-6777.