Buying a vacation home in Orlando is a smart investment move. What many international owners find out later sometimes the hard way is that the US tax system has specific rules for foreign nationals, and not knowing them can cost real money.
This article is not tax advice. It’s a guide so you walk into that conversation with your accountant already knowing what you’re talking about.
First things first: Florida has no state income tax
This is the starting point. Florida does not charge personal income tax at the state level, which makes it one of the most favorable states in the country for international investors. The income your property generates won’t be taxed by the state of Florida.
That doesn’t mean there are no taxes. It means all the ones that apply are at the federal or local level and those are exactly what we’re going to cover.
The four taxes every foreign property owner needs to understand
1. Federal income tax on rental income (IRS)
If you rent your property through Airbnb, VRBO, Booking.com, or any other platform that income must be reported to the IRS. No exceptions, regardless of which country you live in.
By law, foreign nationals generating rental income in the US are subject to an automatic 30% withholding on gross income, unless they elect to be taxed on net income instead.
Two paths:
- Option A Withholding on gross income: 30% is withheld from everything you receive. No deductions, no expenses considered. This is what happens by default if you don’t file a return.
- Option B Filing on net income: You file Form 1040-NR with the IRS, report your actual income, and deduct all allowable operating expenses. In most cases, the effective tax burden drops significantly in some cases to zero, depending on deductible expenses.
Option B is almost always the better choice. But it requires obtaining an ITIN (Individual Taxpayer Identification Number) and filing an annual return. That’s where a CPA with international investor experience comes in.
2. Property Tax the annual property tax
Property tax is an annual tax in Florida calculated based on the assessed value of the property, which varies by county. It’s non-negotiable and doesn’t depend on whether you rent the property or not you pay it simply for owning it.
Rates vary by location. In Orange County, where Orlando is located, the average rate is around 1.15%. For a property valued at $400,000, that’s approximately $4,600 per year.
Key dates: the assessment notice arrives in August, and payment is due by March 31 of the following year. There are discounts for early payment up to 4% if paid in November.
One important detail: the Homestead Exemption which significantly reduces property tax is only available to permanent residents who use the property as their primary residence. Foreign owners with vacation homes do not qualify.
3. Tourist Development Tax the short-term rental tax
This is the tax most property owners overlook. If you rent your property short-term (less than 6 months), the county applies a Tourist Development Tax, generally 6% to 7% of gross rental income. Some municipalities add a small additional percentage on top.
In practice: if your property is in Osceola County (Kissimmee) or Orange County (Orlando), this tax applies to every booking. Platforms like Airbnb and VRBO generally collect and remit it automatically on the owner’s behalf. Verify with your property management company that this is being handled correctly.
4. FIRPTA the withholding when you sell
FIRPTA (Foreign Investment in Real Property Tax Act) doesn’t apply while you own and rent the property. It kicks in when you decide to sell.
Under FIRPTA, the buyer must withhold 15% of the sale price and remit it to the IRS as a safeguard to ensure capital gains taxes are paid. It’s not an additional tax it’s an advance withholding on the gain you’ll ultimately owe.
What many don’t know: if the withholding exceeds what you actually owe, you can recover the difference when you file your return. The process takes time sometimes over a year but the money comes back.
There are exceptions. If the buyer purchases the property for $300,000 or less and declares they’ll use it as a personal residence, no withholding is required. You can also request a reduced withholding via Form 8288-B before closing, if the actual gain is lower than what 15% would represent.
What you can deduct to lower your tax burden
This is where the real impact on your investment’s profitability happens. When you file on net income (Option B), you can deduct a broad list of operating expenses:
- Property management fees
- Cleaning and maintenance costs
- HOA dues
- Property insurance
- Utilities (electricity, water, internet)
- Mortgage interest if you financed the purchase
- Depreciation of the property and furnishings
- Accountant and legal fees related to the property
- Photography, advertising, and listing management costs
Depreciation is particularly relevant: the IRS allows you to depreciate the value of a residential rental property over 27.5 years, generating an annual deduction even if you haven’t spent that money in a given year.
Combined, these deductions can significantly reduce or completely eliminate the tax obligation on rental income for many property owners.
The ITIN: the number you need before anything else
If you’re a foreign non-resident with US income, you need an ITIN (Individual Taxpayer Identification Number). It’s the equivalent of a Social Security number for tax purposes, but for those who aren’t eligible for one.
Without an ITIN you can’t file a return. Without filing, the IRS applies the automatic 30% withholding on your gross income. The process is done directly with the IRS or through a Certified Acceptance Agent (CAA), and can take between 7 and 11 weeks.
If your vacation property management company regularly works with foreign owners, they should be able to guide you through this process or connect you with an accountant who handles it.
LLC or personal ownership? How structure affects your taxes
Many Latin American investors buy through an LLC (Limited Liability Company) rather than in their own name. The decision has tax implications worth understanding:
A single-member LLC with a foreign owner is transparent to the IRS: income is reported under your personal name. But you must file Form 5472 plus Form 1120 Pro Forma to report all reportable transactions between you and the LLC. Missing this filing can trigger automatic penalties of $25,000.
An LLC can also offer advantages when selling in terms of FIRPTA planning, though this depends on how it’s structured. There’s no universal answer: the right structure depends on your specific situation, property value, and long-term goals.
What is universal: consult a CPA with experience in international investors before deciding on structure not after.
The tax calendar you need to keep clear
| Date | Obligation |
| April 15 | Filing of Form 1040-NR (annual return) |
| March 31 | Property Tax payment (discount if paid earlier) |
| Within 20 days of closing | FIRPTA withholding remitted to IRS (if applicable) |
| Year-round | Tourist Development Tax (collected by platform or manager) |
If you can’t file the 1040-NR by April 15, you can request an extension. Do it with the correct form and within the deadline extensions are not automatic.
The most common mistakes that cost money
Five mistakes come up repeatedly among foreign owners who self-manage or have limited professional support:
- Not getting the ITIN on time. Without this number you can’t file, and without filing, the IRS withholds 30% on everything you earn.
- Confusing the withholding with the final tax. The 30% withholding is an advance payment, not the final tax bill. If you file correctly and have deductions, you may recover part or all of that money.
- Ignoring the Tourist Development Tax. Not verifying that your management company or the platform is correctly collecting and remitting this tax can generate debts with the county.
- Not planning for FIRPTA before selling. Finding out about this withholding on closing day creates logistical and liquidity problems. Planning should start well before.
- Using general accountants without non-resident experience. The rules for foreign investors are specific. A mistake in the return can cost more than the fees of a specialist.
How a good property management company supports tax compliance
A property management company with experience handling international owners isn’t just operationally useful it’s also a support point for day-to-day tax compliance.
In practice, that means correctly collecting and remitting the Tourist Development Tax on every booking, issuing the monthly income reports your accountant needs for the annual return, and maintaining a clean record of deductible operating expenses.
If you want to understand how professional property management directly impacts your net return including your effective tax burden it’s worth reviewing before making structural decisions.
Frequently asked questions
Do I have to pay taxes in the US if I already pay taxes in my home country?
It depends on the tax treaty between your country and the US. Colombia, for example, has an active treaty with the United States that can reduce the tax burden. Your accountant should review whether it applies to your specific situation.
What happens if I don’t report my rental income to the IRS?
The IRS applies automatic 30% withholding on gross income and can initiate audits. The risk isn’t hypothetical: the IRS runs active audit campaigns specifically targeting foreign property owners who don’t meet their obligations.
Can I deduct travel to Orlando to visit my property?
Partially. Travel expenses directly related to managing the property may be deductible, but there are specific rules about proportionality and documentation. Consult your accountant.
Can the property manager handle my taxes?
For the operational taxes tied to rentals (Tourist Development Tax), yes. For your federal tax return (1040-NR), no that requires a licensed CPA or tax professional.
When should I start thinking about FIRPTA?
From the moment you buy the property, not when you decide to sell. Early planning allows you to structure the eventual sale more efficiently and avoid liquidity surprises at closing.
What Home Vacation Group does for foreign owners
At Home Vacation Group, we work exclusively with vacation home owners in Orlando, many of them residents of Colombia, Venezuela, Mexico, and other Latin American countries. We know the tax questions that come up because we answer them regularly.
We’re not accountants or tax attorneys. But we connect you with specialists in international investors, and we make sure your property generates the clean, organized reports your accountant needs to do their job well.
If you haven’t yet defined how to structure your investment or simply want to better understand the tax landscape before moving forward we offer a free property analysis where we walk through these aspects with you.
