{"id":409,"date":"2016-01-26T22:11:00","date_gmt":"2016-01-26T22:11:00","guid":{"rendered":"http:\/\/www.davesfloridavilla.com\/private-villa-blog\/?p=409"},"modified":"2019-09-22T21:30:17","modified_gmt":"2019-09-22T21:30:17","slug":"florida-villa-rental-taxes","status":"publish","type":"post","link":"https:\/\/www.davesfloridavilla.com\/private-villa-blog\/florida-villa-rental-taxes\/","title":{"rendered":"Florida Villa Rental Ownership Costs \u2013 part 2 \u2013 taxes"},"content":{"rendered":"

Florida vacation rental taxes taxes taxes!<\/h2>\n

How can $30,000 vacation rental income turn into $0 taxable income…..?<\/p>\n

That heading should actually read “taxes” six times over.\u00a0 Once you start to rent out your property for short term\u00a0periods of less than 6 months then you are subject to the following taxes (correct as of April 2013, in Polk County, Florida).\u00a0 Note that this is based on the average person on a Davenport rental\u00a0– there are some concessions available for military personnel and so on.<\/p>\n

    \n
  1. Sales tax (6%) http:\/\/dor.myflorida.com\/dor\/taxes\/sales_tax.html<\/a><\/li>\n
  2. Tourist tax (5%)\u00a0Link<\/a><\/li>\n
  3. Discretionary sales surtax (1% in Polk) collected as part of the sales tax form<\/li>\n
  4. Tangible personal property tax (a tax on the value of goods in the rental, but exempt if less than $25k) needs to be filed before April each year – you can do this online at Polk County: https:\/\/tangible.polkpa.org<\/a><\/li>\n
  5. Local business tax \/ occupational tax (a license fee of roughly $60) a yearly one off fee that your management company will normally\u00a0sort out for you – this means your business is granted the privilege of doing business in Polk County<\/li>\n
  6. Income tax normally filed yearly: http:\/\/www.irs.gov\/Filing<\/a><\/li>\n<\/ol>\n
    \"tuscan<\/a>

    Tax tax tax tax tax tax!<\/p><\/div>\n

    Gross income amounts (before expenses) for a 4 bed\u00a0vacation rental are unlikely to get above $30k, putting the tax bracket firmly in the 15% mark for everything you earn above $9k.\u00a0 In fact, with your earnings minus the taxes mentioned above, minus additional HOA\u00a0costs (a future blog\u00a0instalment), minus running costs,\u00a0a rental is unlikely to get much above the 10% bracket (the upper threshold of which is $9k profit).<\/p>\n

    Compared to the UK, there is no tax-free amount in the USA\u00a0so you start paying tax with the first dollar of profit you earn.<\/p>\n

    It is safe to assume therefore that you are effectively paying 12% tax on your gross rental income, plus 10% income tax on any profits you make.<\/p><\/blockquote>\n

    A great tax\u00a0guide from Polk county is here: pdf link<\/a>. Be sure to read this before you take the plunge into the vacation rental market – not just to get awareness of costs, but to also get an idea of what you need to set up to avoid the tax people chasing you for unpaid taxes.<\/p>\n

    Real estate tax (similar to council tax in the UK)<\/h2>\n

    On top of this tax, there are 2 additional taxes for everyone in the county, regardless of whether they own a vacation rental or just a single family home:<\/p>\n

      \n
    1. Real estate tax http:\/\/www.polktaxes.com\/propertytaxes\/taxesandassessments.asp<\/a><\/li>\n
    2. Non ad-valorem tax (for services)<\/li>\n<\/ol>\n

      Non ad-valorem tax is used for services and not based on the value of your home.\u00a0 Real estate on the other hand, is.\u00a0 Real estate tax is based on the millage rate and the value of your home.\u00a0 More details can be found in the link above.\u00a0 Roughly speaking a 4 bedroom villa with a pool and spa in Tuscan Ridge will have between $2k and $3K real estate tax and $300 to $500 non ad valorem tax.<\/p>\n

      License fee<\/h2>\n

      One sneaky late entrant to the game is the license fee – or “state resort dwelling license”.\u00a0 In 2013 this cost us $360 as a one off set up fee and gives us the right to rent our villa out to the general public.\u00a0 Annual renewal is around $170 (as of 2019).<\/p>\n

      http:\/\/www.myfloridalicense.com\/dbpr\/<\/a><\/p>\n

      How do I set up my tax accounts?<\/h2>\n

      Either you can get an accountant to do it all, or\u00a0a more common method is a hybrid choice of doing some yourself and some via\u00a0a\u00a0management company.<\/p>\n

      Each of the taxes above needs a separate account.\u00a0 Some\u00a0but not all\u00a0have the ability to register and pay online.\u00a0 The easy ones to set up are the sales tax, the real estate tax, and tangible tax.<\/p>\n

      Tourist tax needs a pdf form filled in and returned online.\u00a0 This is paid over the phone via a credit card.<\/p>\n

      Summary of costs \/ taxes per year (not including running costs)<\/h2>\n

      In summary a rough idea of the taxes and licensing costs of owning a vacation rental in Florida are as follows:<\/p>\n

        \n
      1. Fixed costs and tax: $3,000 – $4,000<\/li>\n
      2. Gross tax percentage on all rental income: 12%<\/li>\n
      3. Tax percentage on net income: 10%<\/li>\n<\/ol>\n

        A worked vacation rental tax\u00a0example<\/h2>\n

        Note that this example is for when you have no personal use of the property<\/strong>.\u00a0 Once again, complications occur when you use the property with regards to how much of the expense you can offset.\u00a0 Further complications arise if you use the property for more than 10% of the total days rented, or 14 days (whichever is greater).<\/p>\n

        When working out your income tax, there are another two very valuable ways of offsetting your profits.\u00a0 The first is your personal tax-free exemption amount –\u00a0 for 2013 this is $3,900 but there are non-resident considerations to make if you are married and filing returns jointly (best to check).\u00a0 The second is in the USA there is a depreciation of the total value of the property (not the land!<\/span><\/strong>)\u00a0over 27.5 years.\u00a0 So say your rental is worth $110k then every year $4,000 can be counted as depreciation and taken off your profits.\u00a0 This does have capital gains implications though.<\/p>\n

        An example:<\/p>\n

          \n
        1. Your villa earns roughly\u00a0$30,000 gross for a 36 week occupancy @ $120 a night<\/li>\n
        2. You pay 12% of this\u00a0to the various taxes listed\u00a0above: $3,600<\/li>\n
        3. Your fixed costs and fixed taxes are $4,000<\/li>\n
        4. Other running costs amount to $14,000<\/li>\n
        5. Mortgage interest works out at $4,000<\/li>\n
        6. Depreciation over 27.5 years is $4,000<\/li>\n
        7. Net profit is $400<\/li>\n<\/ol>\n

          This is lower than the threshold exemption amount of $3,900, so no income tax to pay.<\/p>\n

          Don’t forget that if you are a UK citizen you will need to file an HMRC\u00a0tax return in the UK too.\u00a0 However, any tax due will be offset by the tax you paid in the US.\u00a0 More on this in a future blog post.<\/p>\n","protected":false},"excerpt":{"rendered":"

          Florida vacation rental taxes taxes taxes! How can $30,000 vacation rental income turn into $0 taxable income…..? That heading should actually read “taxes” six times over.\u00a0 Once you start to rent out your property for short term\u00a0periods of less than … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":412,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[86],"tags":[210,209,205,208,212,211,206,204,203,207],"jetpack_publicize_connections":[],"yoast_head":"\nFlorida Villa Rental taxes - Tuscan Ridge<\/title>\n<meta name=\"description\" content=\"Once you start to rent out your vacation property for short term periods of less than 6 months then you are subject to these taxes\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.davesfloridavilla.com\/private-villa-blog\/florida-villa-rental-taxes\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Florida Villa Rental taxes - 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