Florida vacation rental income comes with multiple tax obligations that catch new operators off-guard. Federal income tax, state sales tax, county tourist development tax, and local business tax receipts all apply, and the strategies that minimize legitimate tax liability are different than for traditional rental real estate. This is a high-level guide; always work with a CPA who specializes in real estate or hospitality before making major decisions.
Tax Categories You Owe
Federal Income Tax
Net rental income is reported on Schedule E (or Schedule C if you provide “substantial services” like daily housekeeping). STR operations often qualify for Schedule C treatment, which allows self-employment tax but also unlocks broader deductions and qualified business income (QBI) deduction.
Florida State Sales Tax
6% state sales tax on transient rentals (under 6 months). Register with FL Department of Revenue, collect on every booking, remit monthly or quarterly. Airbnb and Vrbo collect-and-remit on bookings through their platforms but you’re still responsible for direct bookings.
Leon County Tourist Development Tax
Approximately 5% on transient rentals. Register with the Leon County Tax Collector. Combined with state sales tax, your total transient rental tax in Leon County is around 11%.
Local Business Tax Receipt
Tallahassee/Leon County may require a local BTR for any business operated from the property. Check current requirements with the city/county.
Key Deductions
- Mortgage interest on the rental portion
- Property tax on the rental portion
- Depreciation, building over 27.5 or 39 years (residential vs. commercial), furnishing over 5 years, appliances over 7
- Cleaning and maintenance
- HOA fees
- Utilities if landlord-paid
- Insurance premiums (STR insurance, umbrella, etc.)
- Management fees (co-host, OTA fees, channel manager)
- Supplies (linens, toiletries, kitchenware replacement)
- Travel to/from the property for management purposes
- Professional fees (CPA, attorney, photography)
- Software subscriptions (PriceLabs, Hostfully, smart lock services)
Florida Tax-Specific Strategies
- No state income tax in Florida, your federal liability stands alone, no state-level layering
- 6-month exemption, stays of 6+ months are exempt from transient rental tax. If a 6-month stay is feasible (insurance ALE, long corporate placement), the tax savings are meaningful
- Section 179 deduction for furnishing, accelerate depreciation in Year 1 if you buy a lot of furniture
- Cost segregation study, for properties you’ve owned 5+ years or that you’ve made major improvements to, a cost seg can reclassify portions of the building basis to shorter depreciation lives
- Material participation test, if you can show 100+ hours/year of material participation in the rental activity, you can use rental losses to offset other income (typical real estate limitation)
- Bonus depreciation, phasing out but still in effect at 60% in 2026 for many property types
Common Mistakes
- Not registering for tax collection, back taxes plus interest and penalties on multiple years of unreported income are significantly larger than the original revenue
- Mixing personal and business expenses, keep them separate from day one; use a dedicated business credit card
- Underestimating self-employment tax if Schedule C, 15.3% on top of income tax
- Not depreciating, required, not optional. The IRS will recapture if you don’t claim it
- Forgetting Q4 estimated taxes, Florida STRs often produce surprise income; if you don’t estimate quarterly, you’ll owe penalties
This is a high-level guide. Work with a real estate-focused CPA before making decisions. Want help with the operational side of running a Tallahassee STR? Talk to us about co-hosting or sublease.