If you’re thinking about investing in Florida real estate, you need to understand how tax obligations work. Therefore, today we will tell you everything about the taxes of this state for the real estate sector and how they are calculated.

What’s so special about real estate in Florida?

Florida is synonymous with quality of life. According to Telemundo (2021), this was the most desirable state to move in last year. People who do so are motivated by the softness of tax obligations, cultural and gastronomic diversity , the proposal of activities, the climate, etc. In addition, the main attraction is the absence of income tax.

Everyone who arrives will need a roof to sleep on. That is why so much is bet on the real estate market. According to a study by Weldon Cooper (2022), Florida’s population could grow by 32% by 2040. That would bring real estate valuations and better returns for early buyers.

In addition, to meet demand, the sector is obliged to diversify. In this way, more people are given access to this type of investment. Today, the offer is wide and ranges from popular apartments to luxury mansions.

 

 

What tax obligations are paid when acquiring a property?

Although holding financial assets can vary for foreigners, these are the general taxes you will pay when investing in real estate:

Purchase and sale of the property

When selling a house, the tax will be on the profit made. By regulation, the state is governed by federal FIRPTA standards. In theory, the tax will be levied on the sale price, minus the purchase price; However, in practice there are several procedural expenses that can help reduce the tax. The state retains 15% and, in case it is greater than the final amount, you can request a refund.

For owning the property

Year after year, the county appraisals your property and charges you a property tax. On average, this charge is between 1.5% and 2%. Fortunately, thanks to the ” Save our Homes” program, this valuation cannot increase by more than 3% from year to year, which guarantees a constant payment with small variations. In any case, this value may vary since each local administration decides the rates.

How are these tax obligations calculated?

Annual evaluations

Each local administration is autonomous and, to some extent, independent. They are in charge of annually valuing the properties of Florida residents. Clearly, this assessment is subject to general regulation and the protection of the “Save Our Homes” program.

Distance rates

The distance rate represents a percentage of the value of the property (John, 2021). This tax is usually charged to fund community projects such as schools, hospitals, or firefighters in the county. As in other cases, the rate set will depend on the specific place of residence and current tax obligations .

What exemptions exist against these tax obligations?

Fortunately, to file and pay taxes in Florida you can resort to several exemptions. These exemptions represent discounts or acquittals. However, each case is special. Therefore, it may be best for you to get advice and create a personalized plan.

One of the exemptions applies to homeowners. If your property is above USD$50,000, the tax will be charged on the surplus. That is, the total value of the property, minus $50,000.

Similarly, the type of property and the use that is given to it could also influence. If the property is a school, a non-profit organization, among others, it also has benefits.

In addition, your personal situation could also make you save on taxes. Widows or heads of household may also apply for exemptions.

There is even the cash discount. With this discount, for each month that is paid in advance, you will get 1% discount on the total (maximum 4%).

In conclusion, tax obligations in Florida can be quite friendly for real estate investors. However, it is key to get advice and create a personalized plan. Remember that each case is separate and you may be entitled to waivers not described here. In this regard, staying current with county laws and your taxes will be important before investing. At PFS Realty we are expert real estate consultants in Florida. If you are looking to invest or move, do not hesitate to contact us.

References

Cooper, W. (2022). How Florida’s Population Will Change in the Next 20 Years. The Center Square. https://www.thecentersquare.com/florida/how-florida-s-population-will-change-in-the-next-20-years/article_0b25a648-2540-5c66-a436-417ec7d1d167.html

John, C. (2021). What property taxes are paid in Florida? Ehow. https://www.ehowenespanol.com/impuestos-propiedad-pagan-florida-info_416147/

Telemundo. (2021). Florida was the third state that most people moved to, according to the study. https://www.telemundo51.com/noticias/local/florida-fue-el-tercer-estado-al-que-mas-personas-se-mudaron-segun-estudio/2150440/