Essential Facts about Florida Real Estate Taxes
Florida Property Taxes
Understanding Florida’s real estate tax laws is tricky, as there are several different factors which may affect how much you pay in property taxes. If you’re buying property in Florida or are relocating to Tampa, understanding how property taxes are calculated is important, as the assessed value of a property changes when it changes ownership, and the assessed value directly influences how much property tax you pay.
Since property values can fluctuate widely from year to year (depending on the state of the market) it’s important to get an accurate estimate to prevent future unpleasant surprises.
In addition to the assessed value of your property, the amount of real estate tax you pay also depends on the tax rate for each body of local government which taxes property.
For example, your property might be subject to county, school board, city, and other taxes such as hospital district and water management district taxes. If you live in a community development district you’ll be subject to additional property taxes.
Other factors, such as homestead exemptions, Florida’s “Save our Homes” amendment, and Florida’s Amendment 1 serve to limit how much property tax you pay.
County Taxes
Your property tax rate will vary depending on the county in which you live, and where in the county you live. This is because within the county, some regions are incorporated, and some are unincorporated, and the latter areas tend to have slightly lower property taxes. For example, if you live in Lutz or some portions of New Tampa, which are unincorporated, you’ll pay relatively less property tax than someone living in Temple Terrace, some areas of New Tampa or the City of Tampa, which are incorporated.
Community Development District Tax
If you live in a Florida CDD community, there may be other taxes to pay. The community development district tax enabled the developer to share the cost of land and community development amongst the people who live in the community. The tax allows for the provision of additional amenities such as recreation centers, parks, sports facilities, and other amenities that enhance the lives of residents.
These taxes often have two separate portions, one of which is a fixed amount that is payable for a limited amount of time (usually up to twenty years). The other is payable every year, and the amount may vary depending on the community’s needs. Both taxes are payable by the owners of properties within the community, and the responsibility of payment is transferred to the new owner if a property changes hands.
The amount residents pay can vary widely depending on the size of the community, the size of the lots within a village of the community; and the types of recreational facilities and landscaping the community provides. So you can see why it’s important for prospective owners to understand CDD communities to find out how much is payable each year before moving in.
Property Tax Homestead Exemption
Homestead exemption allows all Florida homeowners who are legal state residents to deduct $25,000 from the assessed value of their primary residence, essentially reducing the taxable value of the property. Some homeowners, including senior citizens, veterans, and the blind, may qualify for further exemptions.
To be eligible for an exemption in any given year, you must take possession of your home by December 31, and must apply for homestead exemption by March 31 of the following year. The exemption is not granted automatically. You must apply for any exemptions you believe you are eligible for, and you are subject to an approval process (the requirements for this depend on the exemption you’re applying for). If you qualify for a homestead exemption, you may also qualify to defer part or all of your property taxes. For more information about this, visit or call your tax assessor’s office.
Under Amendment 1 (voted in on January 9, 2008), homeowners who meet the requirements for the original $25,000 exemption are now eligible for a second $25,000 exemption. Anyone who’s eligible for the first exemption will automatically receive the second: there’s no need to fill in an additional application.
The second exemption is calculated a little differently from how you might expect:
- The first $25,000 value of the home is exempt from property taxes (this is the original exemption).
- The second $25,000 is fully taxable.
- The third $25,000 is exempt from all taxes except for school tax.
Why does it work this way? The second $25,000 is taxable to protect Florida cities and towns in which property values are relatively low. If the exemption applied to the second $25,000, many of these places would not be able to collect enough revenue to run their own local governments. The third $25,000 (the second taxable value) is not exempt from school tax applied for a similar reason—it’s necessary to continue funding the state’s schools.
The "Save Our Homes" Amendment
Under the Florida Save our Homes amendment, any homeowner who receives a homestead exemption is guaranteed that the assessed value of their property will not rise more than three percent in any year.
The Save our Homes amendment states that annual property assessment figures cannot exceed the lower of 3% of the prior year’s assessment, or the percentage increase in the Consumer Price Index.
This protects existing homeowners effectively, but it’s important to note that if you purchase property in Florida, SOH will not apply for the purchase assessment. When a property changes hands, the assessed value cap is automatically lifted, and you won’t qualify for SOH protection until you obtain your first homestead exemption. However, once you have obtained the exemption you will be protected by SOH automatically. You do not need to reapply every year.
Remember also that if you’re considering purchasing property in Tampa, or anywhere in Florida, it’s unwise to rely on the accuracy of existing property assessment and property tax values. A protected home may have an artificially low assessed value, but that assessed value may increase sharply once the property changes hands and current real estate market rates apply.
“Save Our Homes” Portability
Amendment 1 brought with it an important change to the way SOH works. This change confers “portability” to the assessed value cap thus allowing Florida homeowners who receive a homestead exemption to transfer the SOH benefit to a new home (if they meet certain criteria).
Under the old system, a homeowner who had lived in their home for many years would enjoy a substantial tax benefit due to the lower assessed value of their home. The old system therefore left many people “trapped” in their homes, unable to move due to the sharp increase in property taxes which would result (as they would not be protected by SOH in the new home).
Under Amendment 1, a Florida homeowner who received the SOH benefit in their existing home can transfer their accumulated tax benefit to their new home, as long as they apply within two years of purchasing the new property (this means they must be eligible for, and receive, a homestead exemption within the two years).
For example if you filed to give up your old homestead after January 1, 2007, and are claiming a new homestead in 2008, you’re eligible as long as you filed your portability application by March 3, 2008. In any given year, the cut-off date for portability application will generally be on or around March 1.
In addition, a Florida homeowner who owns multiple properties can transfer SOH from one to the other. However, doing so means you must also change your primary residence, because the homestead exemption (and SOH) can only be applied to your primary residence. Stiff penalties apply for those who claim homestead falsely.
To take advantage of SOH portability, you must make two separate applications: one for the new homestead exemption, and another to transfer the SOH benefit for the year in which you move. For this you’ll need application forms DR-501T and DR-501R, both of which you can find on the Florida Department of Revenue web site. These can be turned in to the office of the county appraiser in which your new homestead is located.
You can transfer up to $500,000 or 50% of portability benefit to a new homestead. If the new homestead is worth more than the old one, you can transfer the dollar amount. If the new homestead is worth less than the old one, you transfer the percentage. The percentage is calculated by the (current market value –assessed value) / current value.
For example, your current homestead is valued at $300,000, and under SOH $150,000 of that is exempt.
If you move to a new home with an assessed value of $500,000 your portability benefit is $150,000.
If you move to a new homestead with an assessed value of $200,000, you’ll receive $100,000 worth of portable SOH protection. (200,000*50% = 100,000)
Non-Homestead Assessment Cap
The non-homestead assessment cap is another Amendment 1 change. With this change has come a 10% limit on the assessment of non-homestead property, including both residential and non-residential property.
As of January 1, 2008, state law requires that all non-homestead property be assessed at market value only, and be reassessed annually. However, the increase from year to year is capped at 10% (and assessed value cannot exceed market value). Owners of non-homestead property can apply for the 10% cap in 2009.
In simple terms, this means that the assessed value of a non-homestead property will be more or less equal to its market value. If your non-homestead property is appraised in 2008 at $350,000, it will be assessed at $350,000 for tax purposes. If you apply for the 10% cap in 2009, the property assessment cannot increase above $385,000, regardless of how the market performs.
Tangible Personal Property Exemption
Amendment 1 also introduced a $25,000 tangible personal property exemption. Tangible personal property includes any goods, chattels, and articles of value owned by a business, including equipment, machinery, furniture, signs, supplies, and any leased, loaned, borrowed or rented equipment your business uses.
To be eligible you must file a TPP return by April 1 in any given year. If your TPP is less than $25,000 you won’t be required to file again unless the value of your TPP changes dramatically.
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