Tuesday, March 20, 2012

Own rental property? Here’s one expense you can easily avoid ...

I have owned and managed rental properties for over 20 years. And to the best of my recollection, have always used 12-month leases with tenants. But here in Florida leases are just about worthless. The laws are very one-sided in favor of the tenant.

However, I was recently reminded of an important reason for having a lease …

Florida charges a 6% sales tax on rentals that have a term of six months or less. So if you have a lease longer than six months, you’re exempt from collecting the tax. You can find the details here.

Plus here in Palm Beach County, we have a 5% bed tax. Now you would think that a bed tax would mainly apply to hotels. But no! The same deal … without a lease of six months or longer, you better collect the money and pass it along to the tax collector.

Laws can vary. But with most states and municipalities awash in red ink, you can be sure they have teams on the prowl for landlords who aren’t coughing up sales tax, bed tax, or what ever they want to call it.

My advice: Check with your state’s department of revenue and local tax collectors. Otherwise you might end up footing an expense that you could have easily avoided.

Best wishes,

George


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