| If you are in the market for a property in
Florida, here are some basic facts you need to know. Estate agent’s fees for buyers
There are no fees for buyers. But equally, there is no
obligation on the part of a seller’s agent (the realtor) to give you full details of
the property. You may want to hire a “buyer’s agent” to act on your behalf,
searching out properties to visit. Payment to that agent is made by splitting sales
commission between the seller’s and buyer’s agent.
Legal Costs
In Florida, lawyers are not generally used for property
transactions. The legalities are taken care of by “title
companies”, which charge a set fee from $150 to $300. But you may feel a lawyer
is necessary. Legal fees are not significantly more expensive and you are unlikely to pay
more than $600 for a medium-sized property.
Title insurance
This is necessary when buying a property in Florida. It
protects you from financial loss if problems develop regarding the rights to ownership of
your property. It also pays the cost of defending any claim against you. It costs about 1%
of the property’s price, although this may vary.
Sales or purchase tax
There are no sales taxes on either purchase or sale.
However, there are “closing costs”, which do include the following taxes:
- If you are buying a property with a mortgage, then you will
pay the State of Florida what are known as Documentary Stamps on the amount of the
mortgage at the rate of 35 cents for each $100 of mortgage.
- You also pay an Intangible Tax at the rate of 0.002% on the
mortgage amount. So, for example, if you have a $100,000 mortgage, you would pay $350
Documentary Stamps and $200 Intangible Tax. If you are paying cash for the property, you
don’t pay these taxes.
Council Taxes
You pay property taxes to the county in which your property
is located. In the Orlando area, for example, it would either be Orange, Osceola, Lake or
Polk County. This tax is paid annually on the assessed value of your property (which is
usually around 75% of the actual market value of the property. The amount of taxes depends
on facilities and schools in that area, but an average amount for property taxes on a
$150,000 house would be somewhere around $2,000.
Renting out
All rental income received in Florida is subject to US tax
and is paid locally. There is a current double taxation treaty between Florida and the UK
to prevent double payment of taxes.
Federal taxes for a single person range from 10% on income
up to $7,150, rising to 15% on income up to $29,050, then 20% on income up to $70,350 and
so on. The top rate of tax is 35% on incomes above $319,100. There are also different
rates for married couples. Unlike most other states, Florida does not impose a local
income tax.
Some experts claim little or no tax is paid on rentals as
taxable allowances are extremely generous and include mortgage interest relief, the cost
of two annual “inspection” flights from the UK, plus maintenance and other fees.
Selling up
Estate agents will charge up to 6% of the sale price.
You pay what are called Documentary Stamps on the Deed,
which is the full amount of the selling price, at the rate of 70 cents per $100. For
example, on a $150,000 house, you would pay US $1,050.
Capital gains tax on sale of a property is also rare. In
Florida, capital gains is due on profits in excess of $250,000 from purchase to sale per
owner. Therefore a married couple would have to make $500.000 profit from the sale of a
property to incur any form of CGT tax in the USA this may not apply if the property is
classified as an investment and/or has been owned by you for less than 24 months out of
the last 5 years. Consult a competent US accountant for an explanation and advice on your
circumstances.
Mortgages
Generally, overseas buyers are expected to out down a
deposit of at least 20%, but this can go up to 35%. However, as a general rule the higher
the deposit the easier the process will be. Most estate agents suggest you allow 3-4% of
the purchase price for these costs. Obtain a detailed "Good
Faith Estimate" for a complete breakdown of your costs.
Inheritance tax
In Florida, this is known as “Estate Tax”, or
“pick-up tax”. You are exempt from having to file with the federal authority if
your total assets do not exceed $1,500,000 (in 2004 and 2005).
Back to A British Guide to Buying a
home in Florida |
