Florida 1st Services “No.1 for villa management services in Orlando & Kissimmee, plus Osceola, Polk & Lake Counties”
Florida Information
Our Florida Information section provides the following useful information for everyone looking to buy property in Florida to rent, or for those considering buying their dream home and moving to Florida:
- Driving in Florida;
- Road Use;
- Legal & Tax Requirements For Florida Vacation Home;
- UK Tax Tips (UK Self Assessment Tax Return Tips);
- USA Tax Tips (US Taxes for Foreign Owners);
- Making a Will (Changes needed to your UK Will?).
Driving in Florida
Patrol cars are in abundance, and unannounced road blocks are set up in order to strictly enforce the highway code. Avoid a ticket and subsequent fine by:
- Carrying driving license at all times;
- Wearing seat belts in the front of the car at all times;
- Parking off the curb;
- Parking only in the same direction as the flow of traffic;
- Parking clear of tow away zones; and
- Keeping strictly to the speed limits.
Please note that a person found guilty of Driving Under the Influence loses their license automatically, is imprisoned immediately, receives a court date and subsequent harsh penalty!
Road Use
To avoid confusion:
- Be aware that traffic lights are suspended on wires above eye level;
- Note that the sequence of traffic lights from green to red is quick. Therefore, caution is required when approaching a green light;
- Street names are small, suspended on wires across junctions or above eye level on posts at street corners;
- Lane discipline is very relaxed. Although slow traffic should keep on the right, speed bears little relation to lane. Therefore, overtaking on the inside of a lane is common practice. One should always watch out for cars on either side changing lanes at a moments notice;
- Signaling whilst changing lanes must be done at all times; and
- A right turn at a red light is permitted if the way is clear, but only after making a complete stop. NEVER attempt a left turn at a red light!
Legal & Tax Requirements for Florida Vacation Homes
You can only rent out your Florida home on a short term basis if:
- Your sub-division deed restrictions or home association has no ban on Vacation Rentals; and
- Your city or council has no ban on Vacation Rentals.
If your home is to be “rented to guests more than three times in a calendar year for periods of less than 30 days or one calendar month , whichever is less” then you must first obtain a hotel license from the Florida Department of Business and Professional Regulation. This is required by Chapter 509 of the Florida Statutes requires this. Overseas owners are required to obtain a US individual Taxpayer Identification Number (ITIN see below). If the ITIN cannot be quoted on the hotel license application you will have to prove that one has been applied for (provide a copy of the application form). A temporary hotel license will then be issued until you can supply the ITIN. Florida First will provide the ITIN application forms and will apply for your hotel license.
Homes are inspected before a license is issued in order to establish that they are appropriately equipped with things like fire extinguishers and battery backed emergency lighting. Florida First will oversee this for you.
Most cities and counties that have created Vacation Rental Ordinances use the above definition. Check with your city or county zoning department to obtain a copy of any local ordinance. An ordinance may require you to obtain an occupational license and also register your home each year; again, Florida First will oversee this.
We will also assist you in registering for Sales Tax with the Florida Department of Revenue. Some cities and counties also have Tourist Tax. This is sometimes payable to the state with the sales tax, but in other cases the city or county handle it themselves. Where this is the case Florida First will also assist you to register with the county Tax Collector . The value of the furnishings and equipment in your vacation home is also subject to Tangible Personal Property Tax because your home is rented.
Overseas owners of Florida Vacation Homes who rent their property must file a US 1040NR tax return each year. Before starting to rent it is essential that overseas owners complete a W-8EC1 form and give it to their property manager, otherwise the property manager is obliged to deduct 30% withholding tax from all rentals that they receive. Filing the W8EC1 form allows you to file your 1040NR tax return on a "net basis" i.e.. from the rentals you can deduct expenses and will only pay tax on any profit. In addition to all normal expenses, you can deduct mortgage interest and can depreciate the property (but not the value of the lot on which it stands). Most overseas owners find the US 1040NR tax return too complicated to complete and use a US accountant to prepare their tax return. For further information please contact us. All IRS forms and completion instructions can be obtained from the IRS website www.irs.gov.
Overseas owners will also have to report the rental income and expenses of their vacation home for tax purposes in the country in which they reside. If there is a tax treaty between the US and that country then any tax paid in the USA will probably be deductible against tax payable in the other country. For details of UK tax see the separate page on this subject.
If you have any further questions please do not hesitate to contact us.
UK Tax Tips (UK Self Assessment Tax Return Tips)
If you are a new owner worried about how to complete your UK self-assessment tax return, or an existing owner who hasn't been able to face the new forms, here are a few notes to guide you.
If you don't rent your Florida property and therefore have no income from it, then you don't have to submit any figures for it at all. However, a new owner who had no income in the tax year to 5th April but had expenses should submit a return in order to get the tax loss, caused by the expenses, carried forward to the next tax year where it might save you future tax.
Next, all the income from overseas property has to be reported in the 'F' supplement for foreign income and not on the 'L' supplement for Land and Property. Since the 'F' form is not mailed automatically, you will need to telephone the order line to request the form and the notes on how to complete it. The notes are generally quite helpful, but we will stress a few points.
You can convert US dollar income and expenses to pounds using the Inland Revenue's official exchange rate for each year, and can be obtained from the Self-Assessment Help Line. For the tax year ended 5th April 2001 it was 1.4793.
The first point to be aware of is that if your income from your Florida home is less than £15,000 in the year, you do not have to list the expenses in detail. Remember, since married couples have to file separately, that only half the income and expenses of a jointly owned home has to be declared on for each return. So most returns for jointly owned homes would fall below the limit. To calculate your net income you will need to combine the figures from your property manager's bookings with any of your own, less your expenses. Expenses do mean out-of pocket expenditure, and you are not allowed to charge for your own time. Equally the Inland Revenue does not normally allow the cost of travel to your Florida home if you combine it with a vacation. Remember however that you are allowed to include in the expenses any interest that you have paid on a mortgage for your Florida home.
Now we come to question of personal use. If you have used it yourself, or relatives and friends have used it without being charged you will need to insert a figure in the box, reducing the expenses by the proportion appropriate to the free use. The guidance notes do allow you to alternately net off the free use and only claim the expenses appropriate to the rented weeks in the other boxes. Either way, if you used your home, or offered it free to others, don't try claiming all the expenses, otherwise a tax audit could prove a costly business.
If the end result is taxable profit, then you will pay tax on it at your highest marginal rate. If however you have made a taxable loss, you are able to carry it forward to offset any future profits. If you paid any tax in Florida you can offset this against any tax due in the UK . Fortunately there is no tax charged for the enjoyment your Florida home gives you. If you have any further questions please do not hesitate to contact us.
USA Tax Tips (US Taxes for Foreign Owners)
The deadline for filing a US tax return is mid-June. The US tax year operates on a calendar year basis. Overseas owners of vacation homes are required to file a US tax return if you rent your home for more than 14 days in any year. So if you had more than 14 days of rentals between January 1 and December 31 last year you should file a 1040NR return by mid-June this year. The NR in the Form number identifies that it is a return by a non-resident. US citizens and US green card holders have to file different returns by even earlier dates.
Don't panic if this is the first you have heard of it and the deadline looms. There is still time to avoid penalties, and if you read through to the end you will realize that for most people it is a paper exercise that involves the payment of no tax. Let's just address the June deadline issue so that you can relax a bit. You need a US Accountant or tax return preparer to do the job for you. We know few foreign owners who tackle the job themselves. The fee is typically between $150 and $300 per home, though it can be more if multiple returns have to be prepared and if time is short, ask your accountant to file an extension request for you. Extensions of three to six months are granted automatically, provided you request one. Your tax return preparer can file the request on your behalf, so there is nothing you have to sign that need delay the process.
The good news about the next part is that the US tax rules regarding rental income and expenses are very clear and uniformly applied by the IRS. Most owners are correctly advised by their tax return preparer that it is in their own interest to declare to the IRS that the rental activity is to be treated as a US business. This is done by completing form W-8EC1 (previously called form 4224) every 3 years, and sending it to your property manager, as well as making this election on your tax return. This form officially exempts your property manager from the legal obligation to deduct 30% from any rental income before sending you the balance. It also provides you with the right to deduct expenses, mortgage interest and depreciation from the income in arriving at a profit or loss figure for tax purposes.
Since the US system is a self-declaration system, it is up to you to gather all the information on income and expenses, and in consultation with your tax return preparer, compile the figures for the return. The IRS uses a sophisticated computer system to check all returns, and decide who should have their returns audited in person by an IRS inspector. Since the IRS also has a mass of other information from banks, mortgage companies, property managers and the sundry people and organizations that provide you with services, it is a dangerous exercise to hope that they will never catch you if you decide that filing a return is too much bother.
As we said before it is largely a paper exercise. Apart from the proportion represented by your own occupancy of your Florida home, you can deduct all the running costs and maintenance, the costs you incur getting rentals, such as advertising and mailing details to enquirers, and even your tax preparer's fee. You can also deduct the interest part of your mortgage payments and any insurance and property taxes that you may have to include with your mortgage payments. Your tax preparer will also compute a depreciation deduction that you are allowed to set against the rentals. The price you paid for your home, less the value of the land, can be depreciated over and a half years. Similarly, the furnishings and equipment you put in to make it rent able can also be depreciated. This is usually over a shorter period such as seven years.
By the time all your deductions are added up, you have to achieve an exceptionally high occupancy level before you become liable for US income tax. Plus any tax you have to pay in the US can in any event be set against any UK taxes that result from the same rental activity, because the UK has a tax treaty with USA . Other countries have similar treaties with USA.
So the whole paperwork exercise is not as daunting as it first appears. Before we leave you though, we want to address two common questions. As far as the US tax authorities are concerned, you must report all income "effectively connected" with your Florida home. Just because you collect some of it overseas does not exclude it from their grasp. As to whether or not you can legitimately claim any part of your travel to Florida ; you must lean on your tax preparer's guidance and your own conscience. One way of coming to a decision is to think how comfortable you will feel having to justify it, if you are across a table from an IRS inspector who is auditing your return!
If you have any further questions please do not hesitate to contact us.
Making a Will (Changes needed to your UK Will?)
UK owners often ask us if they need to make any changes to their UK will to make it valid in Florida. We do not pretend to be attorneys, but as we understand it, unless you are legally a Florida resident, the answer is technically no, you don't have to have a Florida will, but there are still complications and significant probate expenses if you own property in Florida.
A valid foreign will is normally valid in Florida , but getting probate can be an expensive problem unless you have taken certain precautions in advance. This arises from Florida 's insistence that a "Commissioner" be appointed to take the oath of persons who witnessed your signature on the will. This can clearly cause complications, delay and expense if the witnesses cannot be traced or have died. However, Florida allows "self proved" wills, so that the witnesses never have to return to take the oath for probate. To "self prove" a will it must contain certain statements and the witnesses take the oath at the time of signing it before a Notary Public. Not all UK solicitors are Notaries, but most towns have at least one who is. They needn't be the solicitors who help you draw up the will, as you only need to have the Notary take the oath. Most Notaries are willing to have their assistants act as the witnesses for you, as they understand that most documents requiring their services are needed to comply with overseas jurisdictions where the use of Notaries are more common. An example of wording that we believe is appropriate is as follows, but we recommend you seek legal advice.
(Show where and when the oath was taken.)
We, (will maker name), (witness 1 name), and (witness 2 name) the testator and the witnesses respectively, whose names are signed to the forgoing instrument, having been sworn, declared to the undersigned officer that the testator, in the presence of witnesses, signed the instrument as his/her last will, that he/she signed, and that each of the witnesses, in the presence of the testator and in the presence of each other, signed the will as witnesses.
(Then space for three signatures)
Subscribed and sworn to before me by (will maker name), the testator, and by (witness 1 name), and (witness 2 name) the witnesses on (date)
(Then the seal, signature, name and commission expiry date of the Notary Public)
Nevertheless since getting probate for a foreign will can be so expensive, many owners prefer to have a separate Florida will that is only in respect of their property and possessions in Florida . If you take this route you need to be careful to ensure that it is drafted so that it does not replace your UK will. Your UK will should also refer to the fact that there is a Florida will in existence to assist in obtaining probate in Florida.
