Florida Property Taxes Can Be a Nasty Surprise

Florida Property Taxes Can be a Surprise

We are a Florida mortgage company. Property taxes factor into our job in many ways. When you apply for a mortgage to purchase a home we have to qualify you based on your estimated future taxes. As property values in Florida have rocketed upwards in the last decade property taxes have become a very significant part of our customers’ monthly mortgage payment.

Your New Florida Taxes

Florida is a great place to live. Whether you are moving here for the first time or relocating within the state property taxes can take you by surprise. After you purchase your new home it will be reassessed for tax purposes. We suggest that you speak to your realtor or make a visit to the local city hall to get a reasonable estimate of your future property taxes. If you would like to know what your mortgage payment will be you will need to include a reasonable estimate of your property taxes in your calculation.

What to Expect

As a Florida mortgage company we believe that we have the responsibility to make sure that you have the knowledge that you need to make the most informed decision possible. If you go to city hall to get an estimate of your future property taxes you will likely be told to expect an annual tax bill of between 1.5% and 2.0% of your purchase price. But Florida counties are allowed to tax property for as much as 3% of the value. Ask questions. Know what to expect.

Florida Homestead Exemption Rules

The Florida property tax homestead exemption reduces the taxable value of your homesteaded property by $25,000 for property tax calculations. These days the Florida homestead exemption is less likely to have a significant impact on your tax bill as property values have surged over the recent decade. If you pay $500,000 for your home and get a $25,000 homestead exemption your savings do not add up to a significant percentage of your potential tax bill. But that does not mean that you should not bother filing for your homestead exemption!

Florida Tax Increase Caps

More importantly, the Florida homestead exemption limits the rate at which your property taxes can be increased. The millage rates can be changed - which would represent an across the board adjustment effecting everyone. But once your home is homesteaded the amount that your assessed value can be increased is limited. This rule was enacted in the “Save Our Homes” Amendment to the Florida Constitution and went into effect in 1995. The amendment caps the increase of the assessed value of a home with a homestead exemption to the lesser of 3% or the rate of inflation. So file for your homestead exemption. Contact City Hall for the filing dates and document requirements.

Primary Home Only

The Florida Homestead exemption is only for your primary home. This exemption does not apply to rental properties or vacation homes. At this time the homestead is not transportable. This means that you do not get to carry your current assessed value with you to your next home. When you buy a new home you "restart the clock" and will have to pay taxes on the full value of our new home.

The Future

There is an open dialog in process that may change the substance of the homestead exemption rules in the coming years. This dialog has been triggered by the surge in Florida real estate values in recent years which has simultaneously reduced the liquidity of real estate by creating barriers to home purchases, and made it nearly inconceivable for many people to move from their current home into a new home where they would face dramatically higher and unaffordable taxes.

Would you like to discuss your situation? We will be happy to speak with you.

Contact Jim Kemish at Power Mortgage Corp. for permission to reproduce this article electronically. Copyright © 2007 James W. Kemish. All Content. All Rights Reserved. Power Mortgage Corp. is licensed in Florida, Georgia, Massachusetts, and Virginia.