Life in Florida brings sunshine, beaches, and Mickey Mouse as well as favorable tax benefits. Under current law, there is no state income tax, no state estate tax and the ability to enjoy reduced real estate taxes. If you already reside in Florida, or like so many others, plan to retire to Florida, the Homestead Exemption may result in a greatly reduced property tax bill. To declare domicile is to state the place where you live with the intent of making it your permanent residence. A person may have several residences at the same time, but may only be domiciled in one.
Florida Homestead Exemption is available to a qualifying US citizen or permanent resident that has declared domicile as of January 1, with homestead application to be completed by March 1 at your county property appraiser office. Homestead locks in the value of your property, providing a reduction of assessed value for real estate tax calculation purposes up to $50,000 ($25,000 for school taxes). The Save Our Home Cap (SOH) limits the annual increase assessed value to the lessor of 3% or the National Consumer Price index (CPI). For those with a second home in Florida, but domiciled in a different state, the Non-Homestead cap limits the annual increase assessed value to 10%, however, the cap does not apply to school district taxes.
If the homestead application is not completed when initially purchasing your home, it is important to understand filing for homestead at a later date will lock in the current assessed value for homestead purposes and not the original purchase price. For example, in 2002, two families, both Florida residents, each purchase a home for $100,000:
- Family (A) - filed the homestead application at purchase and locked in the $100,000 assessed value. The 2023 current market value increased to $680,000, but the SOH Cap locked in reduced assessed value for tax purposes of $195,000. Real estate taxes are based on $195,000 less $50,000 homestead exemption ($25,000 for school taxes) with a real estate tax bill of $1,900.
- Family (B) - did not file the homestead application. The 2023 current market value increased to $680,000. Since the application was not filed, there is no SOH Cap. The Non-Homestead Cap has reduced assessed value for tax purposes of $475,000. Real estate taxes are based on $475,000 (no homestead exemption) with a real estate tax bill of $6,000. Family B has now decided to file an application to reduce further real estate tax increases, however, backdating the application is not available and the starting locked in assessed value is $475,000.
If you are currently a Florida homeowner, make sure that you are enjoying the benefits of homestead by checking with your local property appraiser. A Homestead Exemption certification letter is mailed out annually (typically on a colorful piece of paper), so watch for your letter and include in your tax preparation folder. If you are planning to purchase property in Florida, moving homes or a change of ownership, there are many homestead considerations. It is important to discuss the details, and your personal planning opportunities, with your financial advisor.