Florida’s sunny beaches and vibrant communities make it a popular destination for second home buyers. However, buying a second home in Florida comes with unique legal and tax considerations. Buyers can benefit from exploring key issues that affect potential buyers including those from out of state or abroad.

Property Taxes and Homestead Exemption

One of the most significant differences between primary and second homes in Florida is how they’re taxed. Florida offers a homestead exemption that can significantly reduce property taxes on a primary residence. However, this exemption doesn’t apply to second homes.

According to the Florida Department of Revenue, property taxes for non-homestead properties (including second homes) are assessed at full market value. This means second home owners typically pay higher property taxes than they would on a primary residence in Florida.

For out-of-state and foreign buyers, it’s crucial to understand that simply owning property in Florida doesn’t automatically make them eligible for homestead exemption. To qualify, the property must be the owner’s primary residence, and the owner must be a permanent Florida resident.

Homeowners’ Associations (HOAs)

Many Florida communities, especially those popular with second-home buyers, are governed by Homeowners’ Associations (HOAs). Chapter 720 of the Florida Statutes outlines the laws governing these associations.

HOAs can have significant power, including the ability to:

1. Enforce community rules and standards

2. Collect mandatory fees

3. Place liens on properties for unpaid dues

4. Approve or deny certain property modifications

Out-of-state and foreign buyers should carefully review HOA documents before purchasing. Some HOAs may have restrictions on short-term rentals or require minimum occupancy periods, which could affect plans to rent out the property when not in use.

Insurance Considerations

Florida’s climate presents special insurance challenges for homeowners. The Florida Department of Financial Services provides a Homeowners’ Insurance Toolkit that outlines key considerations.

Second homeowners can benefit from being aware that:

1. Hurricane and flood insurance may be necessary or required by mortgage lenders

2. Insurance premiums may, in many cases, be higher for properties that aren’t occupied year-round

3. Some insurers may require additional safety measures for homes left unoccupied for extended periods

Out-of-state and foreign buyers should work with local insurance agents familiar with Florida’s specific risks and requirements.

…purchasing a second home in the Sunshine State comes with unique legal and tax considerations. Buyers can benefit from exploring key issues that affect potential buyers including those from out of state or abroad.

Rental Income and Tax Implications

Many second-home buyers in Florida plan to rent out their property when they’re not using it. While this can provide additional income, it also comes with tax implications.

The IRS provides guidance on renting residential and vacation property. Key points include:

1. If the property is rented for 14 days or less per year, the rental income is tax-free

2. For rentals exceeding 14 days, all rental income must be reported

3. The property’s status as a “second home” vs. “investment property” can affect tax deductions

Foreign buyers should be particularly aware of tax treaties between their home country and the US, as these can affect how rental income is taxed.

Special Considerations for Foreign Buyers

Foreign buyers face additional legal and tax considerations when purchasing a second home in Florida:

1. FIRPTA Withholding: When foreign owners sell US property, buyers are typically required to withhold 15% of the sale price for potential tax liability

2. Estate Tax: Non-resident aliens may face US estate taxes on their Florida property

3. Visa Considerations: Owning property in the US doesn’t automatically grant those without US citizenship the right to live there; visa requirements still apply

The Importance of an Attorney

Given the complexities of purchasing a second home in Florida, especially for out-of-state and foreign buyers, seeking professional advice is crucial. An experienced Florida real estate attorney can:

1. Review contracts and HOA documents

2. Ensure proper title transfer

3. Advise on tax implications

4. Help navigate any unique issues for foreign buyers

Additionally, working with a local realtor familiar with second home purchases can provide valuable insights into specific communities and their regulations.

South Florida Law

Buying a second home in Florida can be an exciting investment, but it comes with a unique set of legal and tax considerations. Are you attempting to understand potential property tax implications, navigate HOA rules, and make sense of insurance requirements? If so, you can turn to the experienced Florida real estate lawyers of South Florida Law.

We advise Florida-based as well as out-of-state and foreign buyers, helping them to handle the often complex considerations of second home ownership. Time and time again, we have successfully advised on issues related to ways that non-resident status affects property ownership: from tax implications to potential rental restrictions.

While individual buyers may have read an overview of key issues in general, at South Florida Law we know that each second home purchase is unique. The specific location intended use of the property, and the buyer’s personal circumstances all play a role in determining the exact legal and tax implications.

If you are considering purchasing a second home in Florida, contact South Florida Law today via our contact form or by calling (954) 900-8885.