Many new vacation home owners know that there are a lot of taxes levied at various levels of government, but may not be aware of exactly what types of taxes are assessed.
Here is an overview of the various taxes that may be relevant to a vacation home owner who engages in short-term rentals in the State of Florida:
The first tax that most people are aware of are property taxes. They are calculated annually by the county, based on the millage rate determined by the County Commissioners and the value of the property determined by the Property Appraiser. The value is based on a comparison of the subject property to other, similarly situated properties (although there are a number of modifiers). The assessments are sent to the owners before the end of the year and they can be viewed on the Internet. These taxes can even be paid online.
A lot less straightforward tax is the Tangible Tax. This is a tax levied by the County and is based on the value of tangible property used in a trade or business, which also includes rental properties (such as furniture, appliances, etc. included in the rental unit by the landlord for use by the tenants). The first $25,000 value is exempt from taxation but only if a timely return is filed in the first year that the property became subject to taxes.
Next, the Counties assess Tourist Development Taxes on short term rentals. The rates are fixed by each county (i.e. Lee County currently assesses a 5% tax while Collier County assesses a tax of 4%). Additionally the State of Florida imposes a sales tax on short-term rentals at 6%, however, most counties also add a discretionary surcharge so that the sales tax percentage may be higher.
Finally, in the case of a non-resident alien, the federal government levies income taxes on rental income either at a flat rate of 30% of the gross rental amount or, if a timely election is made, calculates graduated tax rates on the net income earned.
Disclaimer: This article is for general information only and is not intended as legal advice.