There are various ways to earn money. One of the best ways to do so in Florida is to have a vacation rental property. Every year, thousands of come to Florida to spend their holidays and rent out vacation homes. RPs (rental properties) have a high ROI. You can make money on your investment or cover the costs required for their maintenance.
However, before you do that, it is essential to understand the tax obligations. Just like hotels and bed-and-breakfast establishments have tax obligations, so do short-term rentals. As the host, you are responsible for knowing about the applicable taxes and collecting them from your guests. When you have a CPA in Sarasota, Florida, your job becomes significantly easier.
Basics on short-term rentals
For short-term stays, there is no income tax. Instead, there is a lodging tax. Income tax is something you pay every year after deducting your expenses. Lodging taxes are supposed to be levied on your guests by adding them to their rental charges and then paying them to the appropriate government authority.
In Florida, a short-term rental is defined as a reservation that lasts for six months or less. Therefore, if you rent out your Florida property to your guests, you are required to collect, file, and remit lodging taxes to Florida’s tax authorities.
On top of that, the location of your Florida property matters as well. It determines which tax jurisdictions you need to report to, the types of taxes you must collect, and their rates. To get help with this, you can use a lodging tax lookup tool or hire a CPA who is well-versed with the tax laws there.
When does a personal property become a rental property?
Some people may use their Florida vacation home for themselves without renting it out, and others rent it out throughout the year. There is a third type who might use the property for themselves sometimes and then rent it out at other times. So, the question arises– when does a personal property become a rental property?
If you use your vacation home for personal uses for 14 days or 10% more than the days you rent it out, you can still consider it as a second home. Then, you will be obligated to pay taxes related to owning a second home but not a rental property.
On the other hand, if you do not use your vacation home for at least 14 days or rent it out to other people for more than the days you use it, it will be classified as a rental property under state tax laws. This affects the deductions you can make.
Registering with tax authorities
Before you start collecting rental taxes on your property, you must register with the Florida Department of Revenue. You can do it online or offline, and they will provide you with a registration and sales tax certificate.
In Florida, you do not need to form a Limited Liability Company (LLC) solely to register with tax authorities. Individual owners can register without the need for an LLC.
While local regulations may vary, here are some common requirements for opening a short-term rental in Florida:
- Get the right permits and licenses.
- Check out the zoning regulations.
- There might be laws about advertising, signage, and online listings.
- You might be required to obtain neighborhood consent.
- If your property is part of an HOA, additional rules may apply.
As a business owner, it becomes your responsibility to be aware of these rules to avoid paying fines and facing legal issues.
Meet with a CPA today!
Florida’s tax laws can be complex enough to confuse even the most experienced business owners. With the help of a professional accountant, you would not need to surf the Internet or ask for legal advice from unreliable individuals. Hire one today!
