Florida Tangible Personal Property Tax: Form DR-405, the April 1 Deadline, the $25,000 Exemption, and the Leasehold Improvements You Forgot to Report

Florida has no personal income tax, and it collects from businesses in other ways; the tangible personal property tax is one of them. What's taxed: tangible personal property used in a business — furniture, fixtures, office equipment, computers, machinery, tools, signs, vending machines, rental equipment (the equipment a business rents to others), supplies not held for sale, and leasehold improvements (the build-out a tenant installs in a leased space — often the largest item, and the one most often missed — the DR-405 instructions require a tenant to report its improvements and modifications to leased property, at original cost, on line 20) — owned or controlled by the business on January 1 of the tax year; inventory held for sale is exempt (Florida doesn't tax business inventory), as are household goods and personal effects, licensed vehicles (taxed through registration), and certain agricultural and other exempt property. Who files: every business with tangible personal property in the county on January 1 — including a home-based business with a computer and a desk — files Form DR-405 with the county property appraiser by April 1 (the appraiser must grant a thirty-day extension requested before the due date and may add up to fifteen more days — s. 193.063); the return lists the property by category with its original cost and year acquired (the appraiser applies its own depreciation schedules — not the federal ones); a separate return for each location in each county. The exemption: the first US$25,000 of assessed value on each return is exempt (s. 196.183 — still US$25,000 for 2026) — and a business that doesn't file on time loses the exemption for that year; after the initial return, a business whose property's value doesn't exceed US$25,000 is excused from filing annually (s. 196.183(3)) until its value grows past the exemption, and the appraiser notifies waiver-eligible owners by February 1; a business over the exemption files every year. So a small business with modest equipment files once, qualifies for the exemption, and pays nothing — but a business that never files loses the exemption for the year and faces the penalties. How the value is computed: the appraiser applies depreciation tables by category (a computer depreciates faster than a desk) to the original cost reported, reaching a market value that is usually well above the federal tax basis — because federal section 179 and bonus depreciation reduced the tax basis to zero in the year of purchase, but Florida's appraiser values the equipment at what it's worth; the property tax is the county's millage rate (typically 15 to 22 mills — 1.5 to 2.2 percent — of assessed value in South Florida, set by each county, city, and school district) times the assessed value above the exemption, billed in November with the real estate tax bill (4 percent off for payment in November, 3 percent in December, 2 percent in January, 1 percent in February; delinquent after March 31 — s. 197.162). The federal schedule is not the answer: a business that reports its federal depreciation schedule's net book values (zero for everything expensed) under-reports; the DR-405 asks for original cost, and the appraiser does the rest; the business's fixed asset records (the full federal asset register, including the items expensed under section 179, bonus, and the de minimis election) are the starting point — every asset still in use on January 1 at its original cost, even if fully expensed for federal tax. The de minimis items: the items expensed under the federal de minimis election (the de minimis election guide — US$2,500 per invoice items) are still tangible personal property for Florida — a business with a hundred US$1,500 chairs has US$150,000 of reportable furniture even though no federal asset register lists them; the business keeps a separate inventory of de minimis items for the DR-405 (a common reason small businesses under-report). Leasehold improvements: the tenant's build-out (the partitions, flooring, lighting, the cabinetry, the specialized plumbing and electrical — the leasehold improvements guide's qualified improvement property) is reported by the tenant on the DR-405 as tangible personal property unless the improvements have become the landlord's property and are assessed with the real estate (the DR-405 instructions list them as reportable on line 20, grouped by type and year of installation); a restaurant's or dental office's build-out can be the largest item on its return. Leased equipment: equipment a business leases from a lessor (a copier, a POS system, a financed truck — the lessor's property) is reported by the lessor under most leases, but the lessee lists it on the DR-405 as leased equipment with the lessor's name and address, the monthly rent, the cost new, and any purchase option (the DR-405 instructions require it), so the appraiser can match it. Penalties: failure to file — 25 percent of the tax levied for each year no return is filed (and the exemption lost); late filing — 5 percent per month up to 25 percent; unlisted property (property omitted from a filed return) — 15 percent of the tax on it; and the appraiser can assess back taxes for prior years (up to three years — s. 193.092) when an audit finds unreported property. The appeal: the assessment notice (the TRIM notice in August) can be challenged with the value adjustment board if the business believes the appraiser's value is too high (obsolete equipment, damaged property — documentation of condition). The tax treatment: the tangible personal property tax is a deductible business tax on the federal return. The bookkeeping: the fixed asset register at original cost with every asset in use on January 1 (the federally expensed items included); the de minimis items inventory; the leasehold improvements by location; the leased equipment list with lessors; the DR-405 by county and location; the TRIM notice review. The errors: the return never filed (the exemption lost and a 25 percent penalty); net book values reported instead of original cost; the de minimis items omitted; the leasehold improvements omitted; disposed assets left on the return (paying tax on equipment long gone — remove them); and one return filed for several locations in different counties.

Key takeaways

• Florida taxes business furniture, fixtures, equipment, computers, tools, signs, and often leasehold improvements owned on January 1 — inventory held for sale is exempt.
• Form DR-405 is due to the county property appraiser by April 1 (a thirty-day extension on request), one return per location per county.
• The first US$25,000 of assessed value is exempt — but only if the return is filed; a business under the exemption may be excused from later filings after its initial return.
• Report original cost, not federal net book value — assets expensed under section 179, bonus, or the de minimis election are still reportable at cost.
• Leasehold improvements and de minimis items are the most often omitted; leased equipment is listed with the lessor's name.
• Penalties: 25 percent for failure to file, 5 percent a month for late filing, 15 percent for unlisted property, and back assessments on audit.

The Florida tangible personal property file

Fixed asset register at original cost — every asset in use January 1, including federally expensed items. De minimis items inventory. Leasehold improvements by location. Leased equipment and lessors. Disposals removed. DR-405 by county and location; April 1 (extension to May 1). TRIM notice review; value adjustment board appeal if warranted. The original-cost column is the one businesses get wrong.

Worked example

A Boca Raton dental practice opens in a leased suite: US$410,000 of build-out (cabinetry, plumbing for six operatories, lighting, flooring — the tenant's improvements under its lease), US$380,000 of dental equipment (all expensed federally under section 179 and bonus), US$40,000 of computers and imaging workstations, and US$26,000 of furniture bought in invoices under US$2,500 (de minimis — on no federal asset register). Its DR-405, filed in March, reports all of it at original cost — US$856,000 — and the appraiser's depreciation tables value it at about US$700,000 in the first year; after the US$25,000 exemption, at a local millage near 1.9 percent, the tax is about US$12,800 (US$675,000 × 1.9 percent = US$12,825) — about US$12,300 after the 4 percent discount for paying in November, and deductible. A Hollywood consultant working from home with US$6,000 of equipment files her initial DR-405 once, receives the exemption, and is excused from later filings while under it. A restaurant in Miami Beach that had never filed was audited in its fourth year: the appraiser found US$520,000 of kitchen equipment and build-out, assessed three years of back taxes, and added the 25 percent failure-to-file penalty to each — with the exemption denied for every year it hadn't filed.

Official sources

The Florida Department of Revenue states: “If you file your TPP return by April 1, you will be eligible for a property tax exemption of up to $25,000 of assessed value.” — Florida Department of Revenue, Tangible Personal Property, https://floridarevenue.com/property/Pages/Taxpayers_TangiblePersonalProperty.aspx

The IRS explains: “If you don't have an AFS, you may use the safe harbor to deduct amounts up to $2,500 ($500 prior to Jan. 1, 2016) per invoice or item (as substantiated by invoice).” — Internal Revenue Service, Tangible property final regulations, https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

Practitioner note

Florida taxes the equipment a business owns as property, and the return that reports it asks for original cost — not the zero the federal return shows after section 179 and bonus depreciation — which is why so many businesses under-report without meaning to. Our Florida files build the DR-405 from the full fixed asset register at cost, add the de minimis items no federal register lists and the tenant's leasehold improvements, remove the disposed equipment, and file every location by April 1 — because the US$25,000 exemption is only granted to a business that files, and the 25 percent penalty is charged to one that doesn't.

See also: For related guidance, see the Florida commercial rent sales tax repeal and what still applies; and browse every small business tax guide, by situation.

Next step

Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk handles Florida tangible personal property tax compliance — DR-405 preparation from original-cost asset registers, de minimis item and leasehold improvement reporting, leased equipment listings, exemption qualification, multi-location filings, TRIM notice review, and value adjustment board appeals. See pricing or book a call.