STATE INCOME TAX

Florida is one of only a handful of states that has no state income tax or inheritance tax! This is another reason many wealthy and retired people are so attracted to Florida. (Besides the great weather and lots of water.) Additionally, the state provides very favorable property tax benefits for residents.

PROPOSITION 1 = MAJOR PROPERTY TAX RELIEF

On January 1, 2008 voters passed Proposition 1 property tax measure, once again making Florida one of the lowest taxed states in the nation. Here is a condensed explanation of current property tax laws:

Homestead Rule

If the home is your primary residence, you are entitled to a $25,000 Homestead deduction, $50,000 per married couple.
Example: if you purchase a home that is assessed at $400,000 you will be taxed on $350,000 of Assessed Value if married.

About a month after buying a home, the Assessor's Office will send you a questionnaire and a Homestead Exemption form. Be sure to complete both forms and return them to the Assessor's Office. The homestead exemption will be applied beginning January 1st of the year following your purchase. The Lee County Assessor's office is located in Fort Myers and the phone number is (239) 533-6100. If you have any questions or concerns about homestead exemption give the Assessor's Office a call.

Besides the homestead exemption, there are around two dozen other exemptions. There are exemptions for deployed servicepersons, disabled veterans, homeowners who suffered damage from a storm or other catastrophe and the list goes on. There's even a Super Senior Long Term Exemption that completely exempts some senior citizens who have lived in their homes for more than 25 years from having to pay any property taxes at all. Check with The Lee County Assessor's office for a full list of exemptions. 

Maximum Yearly Increase (SOH - Save Our Homes law)

If your primary residence (Homesteaded) appreciates during the year, property taxes can only increase by a maximum of 3% (or cost of living - whichever is less). Non-Homesteaded or investment property taxes cannot increase by more than 10%, regardless of how much the real estate market may rise during a strong market. This is why someone who has lived in a home in Florida for a long time will have a tax bill far lower than the market value of their home would otherwise dictate. 

If real estate values decrease, your assessed value will decrease accordingly, whether you are Homesteaded or not. However, if the real estate market turns upward by 20% or 30% in a year, your tax assessment can only increase by 3% if Homesteaded, and by 10% if non-Homesteaded. This property tax limitation benefits second homeowners, foreigners, investors, as well as Homesteaded owners.

Portability

When you sell your primary residence, you may transfer the difference between the original assessed value and the current assessed value (up to $500,000). This is called Portability. You then deduct the difference from the next property’s assessed tax value if the new property is the same or higher value.

Example: You buy a Homesteaded property with an assessed value of $400,000. You later sell that home with an assessed value of $600,000. You have $200,000 in “Portability” that can be deducted from the assessed value of your next residence. This is in addition to the $50,000 Homestead exemption. Assuming you purchased your next home that is assessed at $600,000, you will only pay taxes on 350,000!

If you buy a home that is less expensive than the one you sold, and the old property increased in value, you may still apply a percentage formula to save on property taxes. Before portability came along, some homeowners wouldn't consider a move because they didn't want to lose their low tax bills. With portability, they can take the savings with them, up to a maximum of $500,000.

Timing and Other Information

Most of the complication involves portability. Portability requires a separate filing that many homeowners don’t realize they have to complete. Also, there are time limits for moving portability. Thanks to the passage of Amendment 5 on the November 2020 Florida ballot, you now have until the end of the second year following the year in which you sell your homestead to establish your next Florida homestead. If you sold in December 2020, you have until Dec. 31, 2022, to buy and move into your next Florida homestead.

Have you ever noticed that oftentimes the market value of a home on the tax rolls is far below what it will likely sell for? It’s OK for the tax roll market value of a home to be up to 15% below the actual value, but any more than that will cause the seller’s portability to be lower than it should be. This has to be recognized and addressed before the home is sold or the loss of portability will be permanent. There’s no need to hold up the closing—just having the buyers and sellers sign a simple form, available at floridarevenue.com, can allow the issue to be fixed post-closing.

Exemptions are also a big source of lost property tax savings. Quite often, homeowners don’t realize that they’re eligible for an exemption and don’t file for it.

If you are about to list your home, check to make sure your home’s market value on the tax rolls is not substantially less than 85% of a reasonable estimated sales price. This can usually be easily fixed and doing so will not raise the tax bill for the year of sale, or for subsequent years for the new buyer.

If you forgot to file for portability when you filed for homestead on the property and you realize this before closing, many times the unclaimed portability can be claimed and passed forward to the next home, resulting in valuable tax savings. 

We have done our best to provide a simplified explanation of the property tax structure, SOH, Portability, and Homesteading, but it can still be confusing. To receive a more in-depth report on this subject you can also visit the Lee County website at http://www.leepa.org/

Have more questions? Contact us. We're here to help!