Taxes are a serious matter; this is true in all languages and for all countries. After all – taxes were the reason Al Capone finally ended up behind bars! Rental income is something that generates income for the homeowner; as with all income there are certain taxes that need to be paid diligently if one wants to avoid unnecessary trouble.
- Lee County Tourist Development Tax – usually known as Tourist Tax
Currently this amount is 5% of the gross rental amount; this tax goes into advertising and promotion of the area (53.6%), the rest goes into beach and shoreline improvements and stadium maintenance.
- Florida Sales Tax
6.5% of the gross rental amount goes to the Florida Department of Revenue.
Both taxes, Tourist Tax and Sales Tax – a total of 11.5% – apply when renting to transient guests for money no matter if they are family, no matter where they are from or where the homeowner resides because the income is generated here in Lee County, Florida. The Lee County Clerk of Court Internal Audit Department as well as the Florida Department of Revenue enforces taxes.
Usually a homeowner who is renting his or her property to vacation guests would file their taxes by themselves, however, if the homeowner employs an agency who rents the property for them the agency will act as a so-called “Dealer” and submit the taxes of all rentals in a consolidated return for all rental properties under the Dealer’s collective tax number. If the homeowner rents on his or her own in addition to using an agency the homeowner is solely responsible for the taxes that are to be paid from this generated rental income. In this case the homeowner needs to apply and will receive an account number, user name, and password along with information how to operate the account online. It is the homeowner’s responsibility to verify with the agency if they act as a Dealer; we strongly recommended to utilize an accountant to verify compliance with tax payments – this applies especially to our non-U.S. citizen homeowners. The dealer also needs a notarized “Special Power of Attorney” from the homeowner(s) in order to rent the property.
Overall Cost of Maintaining a Vacation Home
To predict what operating budget will be needed for maintaining a vacation home is difficult but certain expenses are a given and apply to all vacation home regardless of location and category.
- Property Tax:
paid in arrears; to be paid between November and April (who pays sooner pays less), amount is being determined by the Lee County Property Appraiser and takes into account location and amenities e.g. pool; the assessed value of the property not the market value determines the amount to be paid.
- Homeowner’s Insurance:
A must for all homeowners who are still paying off their mortgage; not required but a smart thing to do for homeowners who don’t owe money on the property anymore; homeowners insurance is usually dependent upon the cost of reconstruction in case of total destruction of the house. Homeowner’s insurance applies in case of fire or water damage, vandalism, robbery, and other damages. For hurricane damage there is usually a deductible of about 2%; hurricane damage, deductibles, and flood coverage (depending if the house is located in a designated flood zone) are best discussed with an insurance agent.
Lee County Electric (LCEC); the main source of electricity usage are the A/C and the pool heater.
Except for some homes in the Southwest of Cape Coral and all of the Northwest and Northeast of the city are on central city water and sewer; the homes in those areas are still on their own well and septic system. Water from the own well is free of charge while the city charges a monthly water bill. However, the plan is to get all homes in Cape Coral connected to city water and sewer within the next couple of years; the cost for the water and sewer assessment is significant and must be taken into consideration when building or buying a home as some home owners choose to pay in installments that can be deferred to the new owner.
- Telephone, TV and Internet:
There are several providers of services – details are available on their websites.
- Pool and Yard Service:
Pool maintenance and yard service have usually several service options available to their clients e.g. lawn care only, lawn care with weed control and pruning, or with fertilization; pool service may have different rates for services offered weekly or bi-weekly (e.g. vacuum cleaning the pool) – the homeowner usually has several options correlating to price-ranges to choose from.
- Pest Control:
A must for maintaining a hygienic home in the State of Florida. We usually recommend inside and outside service but we ask homeowner to discuss details with Pest Control professionals in regards to service options and rates.
We strongly recommend a service contract with a licensed company to maintain your A/C. An energy-efficient well maintained system saves money in the long run and is less likely to leave you with no cool air on a hot summer’s day.
- Property Management Fee:
Money well spent for those who keep it all up and running while you are away – the house needs tender loving care and someone to look after at least every other week when it’s unoccupied. Your Property Manager makes sure that all of the other services do their job and that everything in and around the house is working properly and looks well maintained and neat. From flushing the toilets to emptying the mailbox – your Property Manager will make sure that the house maintains a “lived-in” and “cared-for” look even during times when you are not there and it’s not rented out to vacation guest.
- Rental Commission:
A certain percentage of the rental income that pays for the services provided by your rental agency e.g. guest acquisition, guest services, and advertisement.