The Sunshine State is one of the top travel destinations in the country for many reasons. The warm, tropical climate boasts thousands of miles of stunning coastlines, crystal clear springs, beautiful beaches, and a diverse culture, and it is home to one of the most unique ecosystems and birder’s paradise––the Everglades.
Florida is one of the top destinations for vacation rentals. Continue reading this guide to learn about all the deductible expenses you can report as a rental property owner.
What’s considered a short-term rental?
In Florida, a short-term rental (STR) usually refers to a residential property or rental unit rented for 30 days or less.
When should I report the rental income for my short-term rental?
The deadline to file income taxes is April 15, 2024. Your rental earnings are considered taxable income. The exception to that rule is known as the 14-day rule, stating that if you rent your vacation home or rental unit for fewer than 15 days annually, you don’t report that income to the Internal Revenue Service (IRS). Therefore, you can’t deduct rental expenses, since it’s not a taxable income.
Do I always need to report rental income on my short-term rental?
Property owners should report their income on transient rentals if occupied for longer than 14 days. While you aren’t obligated to report earnings from short-term vacation rentals occupied for only 14 days annually, Airbnb and VRBO must pay all taxes. A tax professional may advise you to report this as an additional income on your tax return and list it as being eligible for the 14-day rule.
How do I report rental income for my short-term rentals?
Reporting rental income for STRs in Florida is essential for investment property owners. It’s important to comply with tax laws, and in some cases, you may be able to save money on rental property tax deductions.
Follow these steps to navigate the process of filing taxes with itemized deductions.
Step 1: Gather the proper forms
For real estate investors hosting on Airbnb, use a W-9 form to request information for your rental income taxes. Otherwise, Airbnb may withhold 28% of your rental income. If hosts earn less than 28%, Airbnb will not withhold income. Many people’s tax liability on their rental income will be lower than 28%.
Property owners should use a Schedule E 1040 Form to file taxes for their STRs.
Learn more about how to file a Schedule E for reporting rental income in the U.S.
Step 2: Decide if your short-term rental income is active business income or passive rental
An active income is earned from a traditional job where you routinely work. A passive income is an extra income where you don’t have to invest much effort. An active income is taxed at the highest rates. Passive income investors may be eligible to deduct business expenses such as travel expenses and mortgage interest rate fees.
Step 3: Filing your income taxes
Once you have all of your business expense receipts, dates, earnings, and relevant paperwork in place, it’s time to file and submit your STR taxes. Ideally, first-time investment property owners should consult with a real estate professional to ensure they can maximize their deductions.
Key tax deductions for short-term rentals
You may be eligible to write off some expenses related to your vacation rental property, such as Homeowners Association (HOA) fees, travel expenses, insurance premiums, repairs, cleaning, and maintenance costs.
If you’re an investment property owner, not using a property management company, and actively involved in maintaining, operating, and advertising multiple vacation rental properties from the comfort of your home, you could be eligible for a home office tax deduction.
Property taxes paid on a rental are also deductible. In Florida, there is no individual income tax, but you do have to pay applicable county-specific sales taxes. Most real estate investment operating expenses are deductible if you are actively and regularly involved in the operation of your vacation rental.
FAQ: Short-term rental tax deductions in Florida
The Airbnb tax in Florida is 6%. Each Florida county may have individual tourist taxes.
In Florida, the absence of a state income tax benefits the property owners. You can deduct any expense related to your investment property like maintenance, utilities, and advertising costs, which can be deducted from the money you earn renting your home out. This may lower the amount of tax you owe.
Real estate depreciation is the decrease in a property’s value over time. The government recognizes this decrease, and you can deduct a portion of the property’s value each year. According to Investopedia, the average home depreciates 3.636% yearly for 27.5 years.
Our final thoughts
If you’re still debating whether to rent out your investment property for the long haul or just as a cozy getaway spot, you can learn more about managing both short-term and long-term rentals to help decide which path is right for you.
