If you’re thinking about investing in Florida real estate, you need to understand how tax obligations work. That’s why today we’re going to tell you all about this state’s real estate taxes and how they’re 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 having financial assets can vary for foreigners, here are the general taxes you’ll pay when investing in real estate:
Purchase and sale of the property
When selling a home, the property sales tax will be on the gain 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 withholds 15% and, if it is higher than the final amount, you can request a refund.
For owning the property
Year after year, the county assesses your property and charges you a property tax (this is known as 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, you can take several exemptions to file and pay taxes in Florida. These exemptions represent discounts or acquittals. However, each case is special. Therefore, it may be in your best interest to seek advice and create a personalized plan.
One of the exemptions applies to homeowners. If your property is above $50,000, the tax will be charged on the excess. 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 they are real estate in Florida such as a school, a non-profit organization, among others, you also have benefits.
In addition, your personal situation could also save you on taxes. Widows or heads of household may also apply for exemptions.
There is even the cash discount. With this, for each month that you pay 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 exemptions that are 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 relocate, 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/