Why New Residents Should Apply for the Homestead Exemption Now!
Thursday, December 9, 2010 at 08:13AM
As we accelerate toward the end of another year, there is an action that every new Florida resident and those intending to become residents should take. They should apply for the homestead exemption before the end of the year to take maximum advantage of the "Save Our Homes" Amendment to the Florida Constitution.
Each year, every Florida county assesses the taxable value of all real property on its tax rolls. As a result of the Amendment, the taxable value of property that qualifies for the homestead tax exemption may increase no more than 3 percent of the prior year’s assessment or the percentage change in the Consumer Price Index, which ever is less. Of course, the taxable value can never exceed the just valuation (or market value) of the property.
The Market Value of your property increases based on the economic conditions and sales prices of other properties in your area. In some areas of Florida in the years between 2002 and 2006, the market value of some properties increased 20% or more each year for consecutive years. As a result, properties that were originally valued at $300,000 were worth almost $450,000 a couple of years later. You can imagine the increase in property taxes resulting from this.
However, if the $300,000 property was the owner’s homestead, the increase in taxable value was limited to 3% per year. As a result, the taxable value of the property 2 years later would not be greater than $318,270, even though its Market Value was $450,000. This translates into a huge savings in property tax.
Today we are at historical lows in the Market Value of real estate in Florida. We don't know when values will begin to increase, but by applying for the homestead exemption today, you can lock in the low Taxable Value and save thousands of dollars in property taxes in the years after the Market Value begins to rise.
The amendment provides that after any change in ownership or any new qualification for homestead tax exemption, the homestead property shall be taxed at the just value (or Market Value) as of January 1 of the year following the change in ownership. The amendments limits will apply each year following. So if you move to Florida, become a resident and qualify for homestead status, your property will be re-assessed on the first day of the year after you qualify for homestead at its just value with no limitations on the increase. Each year thereafter, the increase in taxable value will be limited by the amendment.
For this reason, you should move into a new home and apply for the homestead exemption prior to the end of the year so the initial reassessment takes place earlier. This causes the 3 percent cap to take effect a year earlier than if you waited until after the first of the year to apply.