The Homestead Exemption Explained
In many states, homeowners have the option of using what’s called a Homestead Exemption to reduce the amount of property tax owed on their home per year. The exemption is a property tax break that lowers the taxable value of a home. Property taxes are assessed by the local taxing authority and are calculated based on the assessed value of the property and location. The Homestead Exemption also serves as a provision to protect against bankruptcy and creditors in the event of a homeowner’s passing. The exemption provides surviving spouses with continued lower tax and asset rates. The allowable Homestead Exemption differs based on which State the primary residence is in and does not lower or affect the assessed value of a home. In some states, a homeowner needs to meet certain requirements (age requirements, be a disabled person or a veteran, etc) to qualify for a Homestead Exemption. In Florida, the exemption is available to all homeowners on their primary residence. The Homestead Exemption can reduce the taxable property value by as much as $50,000 a year.
How Do You Know How Much Will be Exempt?
In Florida, there is a tiered system to the Homestead Exemption. The tiers are determined by every $25,000 of a property’s value. The first $25,000 of a home’s assessed value is fully exempt from property taxes. The second $25,000 value is taxed in full. The third $25,000 of a home’s assessed value is exempt from all but school and district tax liability. The fourth $25,000+ is fully taxable. For instance, if a home is valued at $110,000 the first $25,000 is tax free. The second $25,000 is taxable at the full rate. The third $25,000 is exempt except for school & district taxes and the remaining $35,000 are fully taxable. That means this home has a tax liability on $60,000 of the home’s assessed value (plus the school and district taxes). Taxpayers can maximize the tax credit on their primary residence by up to $50,000 a year by applying for this exemption.
Who Qualifies for a Homestead Exemption?
There are very few limiting factors for Florida homeowners who want to apply for a Homestead Exemption. A Homestead Exemption is only allowable for a homeowners primary residence. As the name implies, a primary residence is a home that a homeowner takes occupancy for the majority of the year. The Homestead Exemption is not allowable to a second home or an investment property. To qualify for a Homestead Exemption you must (1) be the property owner, (2) have lived in the home as of January 1 of the qualifying tax year, and (3) not rent your home for more than 30 calendar days. Renting a property for more than 30 days in 2 consecutive years is considered abandonment of the Homestead Exemption.
Mobile homes can also qualify for a Homestead Exemption as long as the home itself and the land it sits on is owned by the homeowner. The mobile home must be permanently affixed to the land and the homeowner must obtain a Real Property (RP) decal for the home.
Can I Transfer My Homestead Exemption?
If a Florida homeowner moves from one Florida homestead to another Florida homestead, their exemption is not transferable. However, a Florida homeowner obtaining a new homestead in Florida can use a Portability Amendment to limit the increase of the new home’s taxable value. The homeowner can do this by applying for the Save Our Homes Assessment Limitation. The Save Our Homes (SOH) assessment allows homeowners who have previously qualified for a Homestead Exemption to limit the annual increase in the assessed value of a homestead property to 3%. To apply for this, the homeowner must submit a Form DR-501T along with the new Homestead Exemption before March 15th.
Are There Any Other Property Tax Exemptions Available?
There are additional benefits for the elderly, veterans and disabled persons that can be used on top of the Homestead Exemption. The elderly have a Long Time Limited Income Senior Discount available to those 65 and older who have resided in Florida for over 25 years. Income conditions exist for this tax credit. Deployed service members may also qualify for a credit based on the amount of time they were deployed in a given year. Various disabilities also qualify for an additional credit if a homeowner had qualified for the Homestead Exemption.
The application for a Homestead Exemption and all other credits can be done online or by mail. The form required for the Homestead Exemption is a DR-501 and can be found on the Miami Dade Government site along with information on the other tax breaks available. See below for link to information on the allowable credits and forms:
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All information and references made to laws, rules, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.