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Tax Benefits of Investing in Florida Real Estate


Are you planning to invest in Broward County, Florida real estate?

Property ownership has the potential to provide an excellent return on investment. However, you may be wondering what areas provide the best value for your dollar. One of these places is located in the Southeast.

Florida is a must for real estate investors. The Sunshine State has year-round sunny beaches, a thriving economy, and many opportunities for growth.

Many investors have discovered the tax advantages of this state. The accompanying tax benefits make Florida a particularly attractive choice.

In this article, we will describe the major tax benefits of investing in Florida real estate. You will learn how to maximize the financial return of your real estate investment.

Remember, if you think that you would benefit from the services of an experienced property manager, contact us today!



Tax Benefits of Investing in Florida Real Estate

#1: Sole proprietorships and partnerships face no distinct tax

A sole proprietorship is a term used for businesses that are owned by a single individual. These entities are not subject to business or corporate tax in Florida. When you are the owner of a sole proprietorship, you are able to capitalize on the lack of income tax as well. This situation helps to make real estate investments more lucrative.

Another thing to keep in mind is no separate tax on partnerships.

Opting for sole proprietorships and partnerships is the smartest way to invest in Florida if you want to avoid the income tax.


#2: Put your money into opportunity zones

Opportunity Zones were created in 2017 to incentivize long-term investments all over the United States. The designated zones cover communities that fall into the rural or low-income urban categories.


You will find at least one Opportunity Zone in every Florida county. As of early 2020, there will be over 400 Opportunity Zones in Florida. These include counties like Polk, Miami-Dade, and Volusia.

Investing in an Opportunity Zone is a win-win situation because:

  • The communities enjoy a boost in economic development and access to affordable housing projects.
  • As a real estate investor, you will get tax savings that help you maximize your return on investment.

We recommend checking with the Florida Department of Economic Opportunity for the latest updates.


#3: There is zero income tax

There are only seven states that have completely removed the personal income tax. In 2007, the state tax on intangible assets received a repeal as well. This signifies that bonds, stock, and similar assets are not taxed in Florida either.

Real estate investors are able to benefit from this situation. However, you should check the regulations in your current location. Some states tax you regardless of the fact that your income is generated out of state. For example, your sole proprietorship may not be taxable in Florida, but your home state may still authorize tax payments.

You may face more complications if your Florida legal entity does business in other states. This means that you need to comply with taxes based on nexus. In short, nexus means that a business operates in more than one state.

When your scenario creates a nexus, you should consult experts focused on legal and tax questions. The rules surrounding it are exceptionally complicated. It is better to rely on advice given on a case-by-case basis.


#4: Set up an LLC for tax benefits

You could reap benefits when you operate as an LLC in Florida. The entity has to be set up properly. Otherwise, you could lose the tax benefits altogether. When the LLC is opened as a corporation, Florida’s tax code will no longer provide benefits.


The easiest case is when you only have one owner in an LLC. In this case, you will be a disregarded entity, which frees you from the state income tax.

Do you plan on opening an LLC while living in another state?

You need an agent residing in Florida. In order to waive the income tax, you have to form a partnership with this individual. When this partnership has solid legal ground, you will get to enjoy significant tax benefits.


Is There Any Property Tax in Florida?

Yes, Florida taxes properties. The local municipalities determine the tax rates. There is no difference in who owns the particular property because everyone is subject to paying the same rates.


What Are the Other Benefits of Florida Real Estate Investments?

Tax benefits are only part of the deal that investors receive when investing in Florida real estate. Here are the other reasons why investing in this booming Southeastern state is a great idea:

  • The local lifestyle is attractive. There are always going to be people who love the sunny climate, wonderful beaches, and recreational opportunities.
  • The housing market is more stable compared to the early 2010s. Investors and future homeowners alike will find many excellent deals.
  • Florida’s economic growth is fast. It is clear that this oceanside state enjoys one of the fastest-growing economies in the United States.

Another thing to keep in mind is the number of retired tenants. They make for excellent renters as they move less, have a regular income, and carry a lower risk of damaging the property.


The Bottom Line: Tax Benefits of Investing in Florida Real Estate

Real estate investments in Florida come with the possibility of substantial returns.


As a bonus, you are able to reap many tax benefits in the Sunshine State. Here are the main approaches to get the most out of your investment:

  • Pay zero income tax
  • Create a sole proprietorship or partnership
  • Open an LLC that is defined as a disregarded entity
  • Invest in designated Opportunity Zones


If you have any questions regarding the aforementioned information, contact Florida Property Management & Sales.