With its beautiful beaches, and a wide range of tourist attractions, Florida is  a popular destination for vacationers. This makes it an attractive location for property owners looking to capitalize on short-term rentals and vacation properties. With this , it is important for property owners to understand the tax implications associated with short-term rentals and vacation properties in the state. Let’s have an overview of the property tax rules and requirements for such properties in Florida.

1. Sales and Use Tax

When renting out a short-term or vacation property in Florida, the state imposes a sales and use tax on the rental amount. The current sales tax rate in Florida is 6%, which applies to the total rental amount. This includes any cleaning fees or other charges. The property owner to collect and remit the sales tax to the Florida Department of Revenue.

2. Tourist Development Tax (TDT)

In addition, Florida counties have the authority to levy a Tourist Development Tax, also known as the “bed tax.” The bed tax is a percentage-based tax imposed on the rental amount. It is collected by the property owner on behalf of the county. The tax varies by county. This, just as the sales and use tax must be submitted on a regular basis.

3. Registration and Licensing

Property owners must register their vacation rental with the Florida Department of Business and Professional Regulation (DBPR) before renting out a property for short-term stays. The registration is mandatory and requires payment of an annual fee. Notably, some cities and counties in Florida may have their own specific licensing requirements or additional fees for short-term rentals. Therefore, property owners should consult with their local authorities to ensure compliance with all registration and licensing requirements.

4. Federal Tax

Income generated from these properties is generally subject to federal and state income taxes. Property owners are required to report rental income on their federal tax returns, including the income derived from short-term rentals. As  Florida does not have a state income tax, this can be advantageous for property owners. 

 Additionally, deductible expenses related to the property, such as maintenance, utilities, and advertising costs, can offset the rental income. This potentially reduces the tax liability. As such, it is important to consult a tax professional to ensure compliance with all applicable tax laws and identify eligible deductions.

5. Homestead Exemption

Florida offers a valuable property tax benefit known as the Homestead Exemption. This exemption is available to permanent Florida residents who use their property as their primary residence. The Homestead Exemption provides a reduction in property taxes by exempting a portion of the property’s assessed value from taxation.  Property owners should carefully review the eligibility criteria and consult with a tax professional to understand the implications before renting out their homestead property.

The popularity of short-term rentals and vacation properties continues to grow in Florida. It is essential for property owners to understand the taxation requirements associated with these ventures. Complying with the tax laws and requirements of the state is crucial to avoid legal complications and penalties.

Consult a real estate tax accountant to ensure compliance and help maximize the benefits of renting out your vacation home or rental property in Florida.