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Property Taxes – Understanding the Florida Homestead Exemption

The Florida Homestead exemption is one of the most protective real estate exemptions in the country. In short, the Homestead exemption provides a generous property tax break and protects your primary residence (your ‘homestead’) from liquidation to satisfy creditors in the event of a default (in most cases). Further, there is no limit on the value of the home protected under this exemption.

An amendment to the Florida constitution in 1992 also provided limits on how much property taxes can increase in a single year. Homes protected under the Homestead exemption will see a decrease of up to $50,000 off their home’s assessed value. Remember, the assessed value is different from market value (assessed value is almost always lower than what a house would sell for on the open market). The homestead exemption of $25,000 is applied to all homes protected. Taxes for the schools are assessed on that value. For homes assessed at more than $50,000 – up to an additional $25,000 exemption is added (with the full $25,000 applying to homes assessed at $75,000 or more, giving you the full $50,000 in-total exemption).

Tax rates are expressed in ‘mils.’ The rates are different depending on the county or municipality you live in. For example:

Let’s say your house is assessed for tax purposes at $150,000. The school tax rate for your county is 9 mils (0.009 x assessed value), the county tax rate and city tax rate combined are 17 mils (0.017 x assessed value). The school tax rate is charged on $125,000 ($150,000 assessed value less the $25,000 homestead exemption.). The County/City tax rate is based on $100,000 (assessed value – $50,000 homestead exemption). The amount of each county’s tax rates are found on the tax assessors website for your particular county.

In addition, the Save Our Homes law (amended in 1992), caps the amount taxes can be raised on a homestead property by no more than 3% over the previous year (The exact cap can generally be found on your county’s tax assessors website). However, it is important to keep in mind that when you purchase a home in Florida, your tax bill and the previous owner’s tax bill may be different. At the time of a sale, the county appraiser will remove all exemptions from the home, and calculate your taxes based on an initial appraisal, and your particular exemptions that are applicable.

Parallel to the cap, the Save our Homes benefit gives portability to your tax exemption. This applies if you are upsizing or downsizing. The transfer amount is based on the difference between the assessed value and the Just/Market Value of your old and new home. So within two years of your move from your Homesteaded property, you can transfer up to $500,000 of this difference. Ultimately you’re ‘Re-homesteading’ with fair taxability.

There are several loopholes and exceptions to the homestead exemption. One important one to note regards renting your homestead property. You can not rent your property for more than 30 days in a calendar year if you wish to keep your exemption. You’re responsible for notifying the county tax appraiser if you no longer qualify for the exemption. If they catch you, the fines and penalties are steep and are placed as a lien against your property. Be sure to check with your local tax assessor and real estate agent for the most up-to-date information regarding the Homestead Exemption.

Pete Werner

I'm an Orlando local and owner of The DIS (wdwinfo.com), DVCfan.com, DCLfan.com, and host of the DIS Unplugged podcast.

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