Homestead exemptions can be a big help to Florida homeowner’s come property tax time. They can reduce taxable home values by up to $50,000. Additionally, amendment 10 ensures that the taxable value of homes with homestead exemptions cannot increase more than 3% annually, which protects homeowners from rising property taxes due to increasing market values. Homeowner exemptions are overall a great thing for Florida homeowners, but because a home’s taxable value reset to the market value upon sale, they can also lead to some unexpected changes in tax bills for new owners if not properly understood.

Homestead Exemptions in Florida allow Florida homeowners to claim up to $50,000 in exemptions on their primary residence. The first $25,000 exemption applies to all primary residence and it reduces the home’s taxable value for all tax authorities.

The second exemption is up to $25,000 and it is automatically applied to any home with a homestead exemption that is assessed at more than $50,000. Unlike the first exemption, this exemption excludes School Board taxes  which can be up to 40% of the tax bill. This exemption equals the lower of $25,000, or the home’s assessed value minus $50,000.

Impact of Homestead Exemptions on Taxable Value:

Estimated Assessed Value	1st Homestead Exemption	2nd Homestead Exemption	Taxable Value for All Tax Authorities	Taxable Values for School Board
< $50,000	$25,000	$0	$25,000	$25,000
$50,001 – $74,999 Example: $60,000	$25,000	$60,000 -$50,000 =$10,000	$15,000	$25,000
> $75,000	$25,000	$25,000	$25,000	$50,000

If you are eligible for a homestead exemption you can apply online here. 

 

Amendment 10

Amendment 10 of the Florida Constitution, also known as Save Our Homes, is a benefit that applies to any home that has a homestead exemption. It protects Florida homeowners by limiting the amount that the assessed value of their homes can be raised for tax purposes each year to 3%, or the current consumer price index, whichever is less. If the market value of a home increases, so does the tax assessed value. This can be problematic for owners because when the market value skyrockets, so does, in theory, their personal property tax bill. It is therefore very beneficial in these situations to have a cap on assessed home values for tax purposes. The CPI is currently 2.1%, which means that under amendment 10, the taxable value of your home can only increase 2.1% annually, regardless of how much its market value increases. 

As time goes on, the combination of the homestead exemption and amendment 10 can lead to a big difference between the market value of a home and the tax assessed value. This protects the owners from rising property tax bills, resulting in tax savings. If you have been in a home for 10 years in a market with steady growth, and the assessed value was capped at growing 3% annually, your tax assessed value could currently be way below the market value.

The difference in tax assessed and market home value can also result in unexpected increases in property taxes when a buyer takes a possession of a new home. The buyers might see an artificially low tax bill if the property has not been reassessed. If the house had a homestead exemption, the previous owners were enjoying this as well as the benefit of the maximum 3% annual increase in the home’s assessed value. When that house sells, the assessed value resets to the market value and thus may jump. An increase in assessed value means an increase in taxes, so the new buyers may be now looking at a tax bill that is higher than the previous owner’s bill was.

Homestead exemptions are not transferable on a home, but a new homeowner can inherit the previous owner’s homestead exemption. This is really only beneficial for the remainder of the calendar year as the assessed value will only remain capped for that year. As of January 1st, the taxed assessed value of the home would return to the market value for the new homeowner.

 

Portability Transfer of Homestead Assessment Difference

Another great thing about Florida homestead exemptions is that the assessment difference is transferable to another homestead property. This protects homeowners from incurring huge jumps in property taxes when they move their primary residence. As of 2008, homeowners can transfer the savings they have accumulated to another homestead property up to $500,000.

The calculation of the transfer of homestead assessment difference depends on if the new home is an upsize or a downsize in terms of market value. If the new residence has a higher market value than the previous residence, the entire assessment difference is transferable to the new property. If the new residence has a lower market value than the previous residence, the transferable assessment difference will be a percentage of the original assessment difference.

Property exemption tax applications are due March 1st. You can apply online here, or file in person at the Downtown Miami Government Center or the South Dade Government Center. for portability transfer.

 

If you have questions about how homestead exemptions can affect your when buying or selling a home, contact one of our knowledgeable agents today.