Brevard County rentals

LONG-TERM vs. SEASONAL RATES
 
 
LONG-TERM RATES
 
This rate is for a year and can be modified for shorter terms; i.e.:
 
          6 month plus one day rate is yearly rental rate times 1.25;
 
          3 mo. rate is the yearly rate times 1.5 plus 11.0% tax;
 
 
 
SEASONAL RATES
 
This is a vacation rental for a furnished unit and:
 
          Is taxed if for less than 6 months plus one day; 
 
   May include averaged utility allowances;
 
          Typically includes all household items; and,
 
          On townhomes/single families, utility costs will be added.
 
 
It wastes considerable time to negotiate for pricing leverage by inappropriately applying terms for price vs. the actual
proposed rental conditions.
 
 
LENGTH OF RENTAL TERM
 
          Home and Condo Owners Associations set minimum rental periods.
          Brevard County regulates min. 3-mo. rentals in residential housing.
 
Look on website index for more information on these subjects – Thank you!
INFORMATION
5%
TOURIST DEVELOPMENT TAX ON RENTALS
IT'S NOT JUST A GOOD IDEA IT'S THE LAW
Lisa Cullen, C.F.C.
Brevard County Tax Collector
Tourist Development Section
400 South Street, 6th Floor
PO Box 2500 Titusville, FL 32781-2500
Phone: (321) 264-6915 Fax:(321)264-6792,
 
WHAT IS THE TOURIST DEVELOPMENT TAX?
The Tourist Development Tax is a 5% tax on the total rental amount collected from every person or other party who rents, leases, or lets for consideration living quarters or accommodation in any hotel, apartment hotel, motel, resort motel, apartment, apartment motel, rooming house, mobile home park, recreational vehicle park, or condominiums for a period of 6 months or less. According to Florida Law (F.S. 125.0104), exercising this privilege, which is subject to taxation, and the requirements and conditions of that taxation are set forth by the State of Florida, as well as various County Governments within the State unless exempt under the provisions of Chapter (212. F..S.) The responsibility for the collection and enforcement of this Tax was assigned to the Brevard County Tax Collector, who has prepared this brochure to assist the public in understanding, and complying with their Tourist Development Tax responsibilities as property owners.
WHERE DOES THE MONEY GO?
The use of the revenue collected from the Tourist Development Tax is regulated by Florida Statute (F.S. 125.0104). The law requires that the monies shall be placed in the county tourist development trust fund of the respective county. The revenue from the Tourist Development Tax benefits our tourism industry and is governed by Florida Law and Brevard County Code Chapter 102,"Taxation," Article III, as authorized by (F.S.125.0104).
WHO MUST PAY?
Any person who rents or leases any accommodation for six months or less must collect from the tenant, State Sales Tax and Tourist Development Tax along with the rent payment. This tax applies to hotels, motels, apartment buildings, single or multi-family dwellings, mobile home parks and vessels.
WHO IS EXEMPT?
Anyone who has entered into a bona fide written lease in excess of six months is exempt from Sales Tax and Tourist Development Tax on the rent payments. If there is not a written agreement, the owner is required to collect and remit the State Sales Tax and Tourist Development Tax for the first six months. The seventh month and every month thereafter will be exempt provided the renter continues to reside at the same location.
Anyone who is exempt from paying State Sales Tax is also exempt from the Tourist Development Tax. These classifications include full-time students, active duty military personnel, churches and non-profit organizations that have a sales tax exemption number from the Florida Department of Revenue. Contact the Tax Collector's Office for further clarification.
COMMONLY ASKED QUESTIONS
Friends and relatives use my property during the year. Am 1 required to collect the Tourist Development Tax from them?
A.   If you collect rent from them or accept any other form of compensation in lieu of rent, you will be required to file a tax return and collect Tourist Development Tax based upon the amount of rent paid, or upon the fair market value of the compensation received in lieu of rent.
A Rental Agent always handles my rental property. Do I need to apply for a Tourist Development Tax Account Number and submit monthly reports?
A.   In most cases, the Rental Agent has their own Tax Account Number, and will submit your Tourist Development Tax information on a Consolidated Tax Return that includes the rental property of all their clients. However, you should be aware that you, as the property owner, are ultimately responsible for the required tax being paid. Any failure by your Rental Agent to pay the tax may result in penalties being applied against you.
If I use a Rental Agent, but also rent periodically on my own, must I have a Tourist Development Tax Account Number, and submit returns in those months that I rented the property?
A.   Yes. You will need an Account Number since you will be responsible for collecting, reporting, and remitting the Tourist Development Tax during those months in which the unit was rented without the use of a Rental Agent.
AUDIT PROCEDURES’
The Brevard County Tax Collector will
send written notification at least 60 days prior
to an audit. All business records must be
maintained and made available to our auditors upon request in Brevard County.
ENFORCEMENT AND PENALTIES
Is the Tourist Development Tax enforced at the local level, and by whom?
A. Yes, the Tourist Development Tax is enforced and collected by the Brevard County Tax Collector.
What remedies does the Tax Collector have available if someone fails to collect the Tourist Development Tax as required, or collects the tax but does not report or remit the funds to the Tax Collector?
A.   Among other statutory remedies, a Warrant can be issued and filed in Brevard County Official Records, creating a lien against your Real and/or Personal Property in Brevard County.
How often are taxes remitted?
A.   Tourist Development Taxes are payable on the first of the month following the month collected from the tenants land guest. Taxes are delinquent if not remitted by the 20th of the month following the month collected. The owner/operator will receive coupons to report and remit collection to the Tax Collector of Brevard County.
What is the Collection Fee?
A. You are entitled to a collection allowance of 2.5% of the first $1,200.00 of taxes collected when remitted on time. There is NO allowance if payment is delinquent. The penalties for fraud are severe.
 
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1031 Tax Exchange Information
A 1031 Tax exchange can offer significant benefits to real estate investors and buyers. The Internal Revenue Code (IRC) Section 1031 states that a real property owner can sell certain property and then re‑invest those revenues into a like-kind property to defer the capital gains tax. To qualify for a 1031 Exchange, property exchanges must be completed in accordance with the rules set forth in the tax code and the treasury regulations. This site contains a wealth of information about 1031 exchanges, and additional Real Estate Investment Opportunities.
1031 Exchanges
Frequently Asked Questions (FAQ) about 1031 Exchanges
What is a 1031 exchange?
Under Internal Revenue Code (IRC) Section 1031, a real property owner can sell certain property and then reallocate the proceeds in ownership of like-kind property and defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. The 1031 exchange can offer significant tax advantages to real estate buyers.
Who should consider a 1031 exchange?
If you have real property that will net you a gain upon sale (generally property that has been substantially depreciated for tax purposes and/or has appreciated in fair market value), then you are exactly the person who should consider a 1031 exchange.
There are 5 tax classes of property:
1.        Property used in taxpayer’s trade or business
2.        Property held primarily for sale to customers
3.        Property that is used as your principal residence
4.        Property held for investment
5.        Property used as a vacation home
Section 1031 applies to the first and fourth categories, and sometimes the fifth category. Business use is defined as, "To hold property for productive use in trade or business." Property retired from previous productive use in business can be qualifying property. Investment purpose is defined as real estate, even if unproductive, held by a non-dealer for future use; or the increment in value is held for investment and not primarily for sale. Investment is the passive holding of property, for more than a temporary period, with the expectation that it will appreciate. Property held for sale in the immediate future is not held for investment.
Why should you consider a 1031 exchange?
·         Defer paying capital gains taxes. A properly structured exchange can provide real estate buyers with the opportunity to defer all or most of their capital gains taxes.
·         Leverage.
·         Upgrade or consolidate property.
·         Diversify. Own multiple properties rather than just one.
·         Relocation to a new area.
·         Differences in regional growth or income potential.
·         Change property types among commercial, retail, etc.
What are the general 1031 exchange rules?
The real property you sell and the real property you buy must both be held for productive use in a trade or business or for investment purposes, and must be like-kind.
The proceeds from the sale must go through the hands of a qualified intermediary and not through your hands or the hands of one of your agents, or else all the proceeds will become taxable.
All the cash proceeds from the original sale must be reallocated to the replacement property—any cash proceeds that you retain will be taxable.
The replacement property must be subject to an equal level or greater level of debt than the relinquished property or the buyer will either have to pay taxes on the amount of the decrease or have to put in additional cash funds to offset the lower level of debt in the replacement property.
Disclaimer – There are substantial risks associated with the federal income tax consequences of purchasing and owning real property, especially if the purchase is part of a tax-deferred exchange under section 1031 of the code. In addition, the income tax consequences of purchasing and owning real property are complex. Because the tax consequences are complex and certain of the tax consequences may differ depending on individual tax circumstances, each prospective purchaser must consult with and rely on his own independent tax advisor concerning the tax consequences of such a purchase and his individual situation.
1031 Timeline
Identification Period
Within 45 days of selling the relinquished property you must identify suitable replacement properties. This 45 day rule is very strict and is not extended should the 45th day fall on a Saturday, Sunday, or legal holiday.
Exchange Period
The replacement property must be received by the taxpayer within the "exchange period," which ends within the earlier of 180 days after the date on which the taxpayer transfers the property relinquished, or the due date for the taxpayer tax return for the taxable year in which the transfer of the relinquished property occurs. This 180-day rule is very strict and is not extended if the 180th day should happen to fall on a Saturday, Sunday or legal holiday.
Replacement Property Identification
3-property rule
You may identify any three properties as possible replacements for your relinquished property. More than 95% of exchanges use the 3-property rule.
200% rule
You may identify any number of properties as possible replacements for your relinquished property as long as the aggregate value of those properties does not exceed 200% of the value of your relinquished property.
95% exemption
You may identify any number of properties as possible replacements for your relinquished property as long as you end up purchasing at least 95% of the aggregate value of all properties identified.
Like-Kind Property
In a 1031 like-kind exchange you can exchange any real property for any other real property within the United States or its possessions if said properties are held for productive use in trade or business or for investment purposes. Examples of 1031 like-kind exchange property include apartments, commercial, condos, duplexes, raw land and rental homes*. As used in IRC 1031(a), the words "like-kind" mean similar in nature or character, notwithstanding differences in grade or quality. One kind of class of property may not, under that section, be exchanged for property of a different kind or class. Examples of qualified 1031 like-kind properties and like-kind exchanges:
·         apartment building for farm/ranch
·         office building for hotel
·         raw land for retail space
·         unimproved property for commercial property
·         airplane for airplane
Examples of non like-kind properties include primary residences, stocks and bonds, notes, partnership interests, developed lots held primarily for sale and property to be resold immediately after initial purchase or completion of improvements.
* Qualification for Section 1031 exchanges depends upon the extent of personal use.
1031 Exchange Formats
 
1031 History
Qualified Intermediary
The Role of the Qualified Intermediary (QI)
The QI is a 1031 exchange intermediary or entity that can legally hold funds to facilitate a 1031 exchange. To be qualified, the 1031 exchange intermediary must not be a relative or an agent of the exchanging party. As an exception, a real estate agent may serve as a 1031 exchange intermediary if the current transaction is the only instance in which the agent has represented the exchanging party over the past two years.
The use of a QI is essential to completing a successful 1031 exchange process. The QI performs several important functions in the 1031 exchange process including creating the exchange of properties, holding the 1031 exchange proceeds, and preparing the legal documents.
GLOSSARY - Investment Real Estate Glossary
Accommodator
A qualified intermediary who agrees to assist the exchanger to affect a tax-deferred exchange. Also described as a facilitator or an intermediary, a qualified intermediary cannot be the taxpayer, a related party, or an agent of the taxpayer.
The Role of the Qualified Intermediary (QI)
The QI is a 1031 exchange intermediary or entity that can legally hold funds to facilitate a 1031 exchange. To be qualified, the 1031 exchange intermediary must not be a relative or an agent of the exchanging party. As an exception, a real estate agent may serve as a 1031 exchange intermediary if the current transaction is the only instance in which the agent has represented the exchanging party over the past two years.
The use of a QI is essential to completing a successful 1031 exchange process. The QI performs several important functions in the 1031 exchange process including creating the exchange of properties, holding the 1031 exchange proceeds, and preparing the legal documents.
Adjusted basis
The basis of the property adjusted for any capital improvements or depreciation. To calculate the adjusted basis, take the basis (the cost of the property) and add the cost of any capital improvements made to the property during the taxpayer's ownership, and then subtract any depreciation taken on the property during the same time period. Once the adjusted basis is known, gain or loss can be computed on a transaction.
Amortization
A gradual paying off of a debt by periodic installments. Example: A $100,000 loan is arranged at a 12% interest rate. The borrower pays $13,500 in the first year. Of the payment, $12,000 is for interest, $1,500 for principal. After the payment, the loan balance is amortized to $98,500.
Amortization schedule
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
Amoritization term
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Annual percentage rate
The cost of debt (such as a mortgage) that consumers pay, expressed as a single annual percentage.
Assumable mortgage
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
Basis in the replacement property
In a 1031 exchange, the deferral of the tax on the gain is accomplished by requiring the taxpayer to carryover (substitute) the basis of the relinquished property to the replacement property with suitable adjustments in the event additional consideration is paid.
Bear market
An extended period of falling value of the overall market, accompanied by anticipation of negative economic activity.
Boot
"Unlike" property included in a like-kind exchange. Example: In an exchange of property under Section 1031 of the Internal Revenue Code, Collins exchanges her warehouse worth $100,000 and receives Baker's land worth $125,000. Collins pays $15,000 cash and a car worth $10,000 in order to equalize the values of the properties exchanged. The car and cash are boot.
Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating the sale of an asset between them.
Bull market
An extended period of rising value of the overall market.
Capital gain
Gain on the sale of a capital asset. There are limits on the deduction of capital losses against ordinary income. Example: Collins purchases land for investment purposes for $10,000. Thirteen months later she sells it for $14,000. She reports the $4,000 profit as a long-term capital gain on her income tax return.
Capitalization rate
A rate of return used to derive the capital value of an income stream. The formula is value equals annual income divided by the capitalization rate.
Class A property
Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high-quality standard finishes, state of the art systems, exceptional accessibility, and a definite market presence.
Concurrent exchange
Also referred to as a simultaneous exchange when the exchanger transfers out of the relinquished property and receives the replacement property at the same time.
Deferred gain
In a tax-deferred exchange, the amount of realized gain that is not recognized. Example: Donald arranged a tax-deferred exchange in which $1 million of gain was realized but not recognized (that is, it was not currently taxed). The deferred gain of $1 million carries over to the newly acquired property in the form of a reduced tax basis, to be taxed if and when the newly acquired property is sold in a taxable transaction.
Delayed exchange
A transaction in which a property is traded for the promise to provide a replacement like-kind property in the near future. The Tax Reform Act of 1984 allows investment real estate or real property used in a trade or business to be sold with the tax on the gain deferred, provided replacement property is identified within 45 days and closed within 180 days. Other strict requirements must also be observed.
Depreciation (tax)
An annual tax deduction for wear and tear and loss of utility of property. Example: Tax depreciation allows a tax deduction without a cash payment, thus providing an important benefit to real estate owners. A tax depreciation deduction may be claimed even when the property's market value increases. The annual tax depreciation deduction allowed for improvements (land is not depreciable) is 3.64% of the original cost of the building for rental housing and 2.56% for commercial and industrial property.
Depreciation
Decline in value of an asset. Property depreciation occurs due to general wear and tear.
Due diligence
This term can be applied in the following ways:
1.        making a reasonable effort to perform under contract. Example: A prospective homebuyer signed a sales contract contingent on the sale of her present residence. She is expected to use due diligence in marketing her present house.
2.        making a reasonable effort to provide accurate, complete information. A study that often precedes the purchase of property, which considers the physical, financial, legal, and social characteristics of the property and the expected financial performance; the underwriting of a loan or purchase. Example: The pension fund sent various experts to perform a due diligence study of a property it was considering for purchase. Matters to be considered included the mechanical and electrical systems of the building, local market conditions and competition for the property, and environmental hazards.
3.        examination of property to detect the presence of contamination. Example: Before lending on a shopping center, the lender insisted on an environmental audit as part of its due diligence.
Equity
A buyer's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
Escrow
an agreement between two or more parties providing that certain instruments or property be placed with a third party for safekeeping, pending the fulfillment or performance of a specified act or condition. Example: The deed to the property and the earnest money were both placed in escrow pending fulfillment of other conditions to the contract.
Exchange period
In a 1031 exchange, the replacement property should be received by the taxpayer within the "exchange period," which ends on the earlier of 180 days after the date which the taxpayer transferred the property relinquished, or the due date for the taxpayer's t

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