When you think about the financial considerations that come with selling a house, many people focus on the sale price and real estate agent commissions. But what they might not be thinking about are the Florida real estate taxes involved in making such a sale.
Taxes can be a huge burden on sellers, but there are some things you can do to make your life easier. In our latest post we take a look at the implications of Florida real estate taxes and what steps you need to take before closing. For more information about how taxes affect house sales, check out this article!
Hire a Tax Accountant
First things first, if you’re able to, we recommend going to meet with tax accountants who specialize in Florida real estate taxes. Why suffer through figuring out the tax code when you can get a professional to do it for you? A wise accountant will help make sense of your Florida taxes by giving you all the information that is pertinent. Your investment in speaking with an accountant will pay off.
An Introduction to the Main Three Florida Real Estate Taxes
The first thing to know about Florida real estate is that there’s three different kinds of taxes you have to take into account. First, property tax rates vary by municipality but they’re all based off the taxable value of your home or other type of investment.
Another important one to keep in mind is the capital gains tax. This tax is applied to the profit of the sale of your home. In short, a certain percentage of the sale of your home will be deducted after closing.
The third only applies if you are a landlord of rental properties. Whatever net profits you make from rental income will have a federal tax applied. Even if the rental is only short-term (i.e. AirBnB), you will be responsible for a sales tax to be deducted from your profits.
These are the basics to the three main Florida real estate taxes – but let’s dive into them a little deeper.
Paying property taxes is a good thing for the local economy and community. That money goes towards things such as public schools and city infrastructures. This benefits everyone in their area by making them more accessible to quality education or reliable transportation that can lead people out of poverty. The amount of property taxes you owe is determined by the local county’s appraiser, using housing market data from last year. Even if you buy a new house next week and sell your old one, tax rates are set locally at the town level not on state-wide or national levels.
Property owners who are widows/widowers or disabled veterans can receive a credit against some taxes owed. But for that person to be eligible for the tax credit, they need their property to serve as their primary residence and cannot use it as a rental property or second home. Florida is one of the few states with a statute for determining property values. These statutes are published each year on county websites and can also be found through sites like Florida Department of Revenue’s website.
It’s important to note that you don’t have to pay property taxes in Florida until March 1. However, if you wish, it is possible for your first payment date of the tax year be November 1st. For every month which has been paid by this time (up to four), then a one percent discount on your overall tax bill. You might be eligible for a discount in your property taxes if you move to Florida and make it your primary residence. According to the Save Our Homes Act, assessed values can’t increase more than three percent per year. All of that will help reduce what you’re paying every month!
Capital Gains Tax
The capital gains tax is one of the most important things to be mindful of when buying or selling a home in Florida. The difference between your purchase price and the original cost you paid for it, can result in an advantageous situation if all other taxes are taken into consideration as well.
The amount of capital gains tax on your sale depends on various numbers and conditions. They include everything from the condition of the property to whether or not the buyer is a legal resident of United States citizen, each variable adjusts percentage. There are also plenty deductions available. Including origination fees paid for loan application process, closing costs incurred when transferring title. Also, addition points repaid towards mortgage at lower interest rates with some loans to get more affordable monthly payment options .
If you live in the state of Florida, then chances are that your capital gains taxes rate is around 15%. However, it’s more likely than not that you qualify for an exemption. Capital gains are limited, though, for example if a seller’s home has been their primary residence for at least two years within the last 5 years, they are limited to $250,000. If the seller is married, that amount doubles to $500,000 under the same criteria.
The capital gains tax is something to be taken seriously. You’ll find Schedule D on your IRS form and it’s important that you report them accurately so that you don’t get fined for any errors or omissions. You should note that if the property was owned for one year or less, it qualifies as a short-term capital gain. If it is longer than a year, then you will qualify for long- term gains on your return.
Rental Property Taxes in Florida
In a time of economic uncertainty, more and more Florida homeowners are taking advantage of their properties by renting them out to vacationers. Regardless of how you do it, be sure to remember that almost all rental income is taxable. The IRS does give you a little break on second homes rented for 14 days or less which qualifies as tax-free.
Your property is considered a business if you use your second home or vacation home for 14 days or less during the period of time which it is rented. Similarly, the property will be considered a residence if you use it for more than 14 days during a year. Essentially, this just means if you go live in your condo in Miami for the entire month of June, to the IRS it will be considered a residence. Even if you rent out that condo to others for the rest of the year.
If the property is considered a personal residence, you’ll be able to itemize your deductions such as mortgage interest and property taxes. Of course, this all depends on how much of it was used in relation to what time renters were living there for. This isn’t difficult to calculate on your own – just divide the number of days rented by the number of days used.
This all changes if your rental property is occupied enough to be considered a business. You’ll be able to deduct the cost of rent as well as losses up to $25,000 in current or future years. You can also recover your investment by taking depreciation deductions on your income-generating property.
Also, keep in mind the “transient rental accommodations,” or “transient rentals.” This is an imposed 6% sales tax on income made from rental properties for periods less than 6 months. Each county in Florida has the option of imposing taxes on transient rental accommodations, so you’ll need to check with your local council about what additional tax they charge.
How Can I Avoid Florida Real Estate Taxes?
Now that you know about the taxes involved when trying to sell your house in Florida, it’s a lot of information and a lot to take in. But there is another solution where you can avoid these kinds of extra payments entirely! SellThatFloridaHouse is the professional home buyer in Florida. We will give you cash for your house and we buy houses with no realtor involved, saving you time!
If you’re in a bind because of tax or lien issues, we’ll buy your house. We work with hundreds of Florida homeowners who are looking for ways to sell their homes and save money on taxes so give us a call today! We’ll review the details of your house and find time to meet you at the property quickly. We handle all repairs so that even if something goes wrong, you don’t need to worry about it! After we do a thorough assessment of what needs repairing or replacing for a fair cash offer based on its value. The best part is there’s no fees beyond this deal in which case, easy peasy lemon squeezy!
If you accept our offer, we’ll close on the house in your timeframe. No Florida real estate taxes to deal with and no extra costs. Simply move forward with your life knowing that SellThatFloridaHouse is handling everything from here!