We can help you save money on probate in all Florida counties

Florida Homestead: Property Tax Benefits and the Save-Our-Homes Cap

Like most states, Florida law provides for lower ad valorem tax assessments on property that is used as a homestead.  The statutory exemption is found in Section 6(a) of Article VII of the Florida Constitution, which provides:

Every person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, or another legally or naturally dependent upon the owner, shall be exempt from taxation thereon, except assessments for special benefits, up to the assessed valuation of twenty-five thousand dollars and, for all levies other than school district levies, on the assessed valuation greater than fifty thousand dollars and up to seventy-five thousand dollars, upon establishment of right thereto in the manner prescribed by law.

Under this provision, every Florida homeowner can receive a homestead exemption up to $50,000. The first $25,000 in property value is exempt from all property taxes, including school district taxes.  The additional $25,000 exemption is available for non-school taxes and applies only to the assessed value between $50,000 and $75,000.

In 1992, the protection afforded by homestead exemption was amplified by the Save-Our-Homes Amendment (Art. VII, § 4(d)(1), Fla. Const.).  The Save-Our-Homes Amended capped the amount of property appreciation that the taxing authorities could tax.  While property value is assessed at “just value” on January 1 of every year, the change in value cannot exceed the lower of 3 percent of the prior year’s assessment or the percentage change in the Consumer Price Index.

The result of the Save-Our-Homes amendment is that, regardless of how much the property actually appreciates, the value that is assessed for tax purposes cannot exceed 3 percent of the prior year’s value.  This provides a valuable economic protection to homeowners, particularly in areas with rapidly appreciating property values.

Here’s a quick rundown of the Save-Our-Homes cap:

  • Qualification. Those who own and occupy their home as a permanent residence and qualify for the general $25,000 homestead exemption automatically qualify for the Save-Our-Homes cap.
  • Limitation. The Save-Our-Homes cap limits the property value that can be assessed, not the actual taxes that can be levied.  In other words, a homeowner’s property taxes increase by more than 3 percent if the taxing authorities change the millage rates.  The cap only applies to increases in property value.
  • Improvements or Additions to the Property.  Improvements or additions to the property are added to the assessed value and not limited by the cap.  For example, if a homeowner builds a new structure on the property that increases the value by $50,000, that $50,000 will be added to the overall assessment without regard to the 3 percent cap.
  • Adjacent Vacant Lots.  Adjacent vacant lots can be covered by the cap if both the homestead property and the adjacent vacant lot are owned by the person receiving the homestead exemption and that person asks to add the lot.
  • Recapture. If property has not been assessed at market value, the taxing authorities can raise the value for assessed purposes by the lesser of 3 percent or the increase in CPI, regardless of whether the property’s value actually increases during the year.  In other words, the property appraiser can increase assessed value of properties that are valued below fair market value regardless of whether the property actually appreciates.  This allows assessors to bring undervalued properties up to fair market value.
  • Portability. A Florida resident who transfers to a new homestead can transfer the Save-Our-Homes cap from the previous homestead to the new one.  To do so, the Florida resident must re-establish a new Florida homestead within two years of January 1 of the year in which the person left the prior homestead.  The person must then submit Form DR501T to the property appraiser for the county where the new homestead is located by March 1.

All good things must come to an end.  With the Save-Our-Homes cap, the end comes when the homestead protection is removed (as when the home is transferred to a new owner).  On January 1 of the year following a change in ownership, the property will usually be reassessed at true fair market value.  The new owner can apply for a new homestead exemption at that time, and the cap will begin anew for the new owner.

Related Resources: