Homestead Exemption in Florida - Reduction of Ad Valorem Property Tax

Reduction of Ad Valorem Property Tax

The Great Depression began in 1929 causing reforms in ad valorem property taxes in Florida. As the Depression deepened, many Florida property owners found themselves unable to pay their property taxes and in serious danger of losing their homes. In response to this serious problem, State Representative Dwight Rogers of Fort Lauderdale in 1933 proposed and successfully passed legislation to place the $5,000 Homestead Exemption Amendment on the state ballot. Florida's voters overwhelmingly approved the Homestead Exemption Amendment in 1934 (Article X, Section 7, as it was numbered before the 1968 Florida Constitutional re-write). The initial Homestead Exemption sought to ease the burden on homeowners by exempting property taxes on the first $5,000 of a homeowner's residence. The exemption was increased by the Florida Legislature by statute to $10,000 during the 1960s, although this was not incorporated into the constitution. By Constitutional amendment adopted by a landslide in 1980, the exemption was increased to $25,000. On Jan. 29, 2008, voters approved an amendment to the Florida Constitution raising this exemption to $50,000.

Florida property tax homestead exemption reduces the value of a home for assessment of property taxes by $50,000, so a home that was actually worth $100,000 would be taxed as though it was worth only $50,000. However, the second $25,000 of homestead coverage does not apply to the school portion of property taxes -- and only applies to the third $25,000 of a property's total just value (i.e., that portion of a property's value between $50,000-$75,000).

Additionally, the Florida homestead exemption caps the rate at which property assessments may be increased annually. Though millage rates may be changed, the assessed value a house with a homestead exemption can be increased by is fixed. This is the result of the “Save Our Homes” Amendment to the Florida Constitution which was passed by voters in 1992, 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. This means that if an owner had a homestead exemption on a home valued at $100,000 in 1995, and the exemption was still valid in 2005, the most the home could be assessed at is approximately $126,000 . For comparison, records of the Florida Association of Realtors show the median price of a single family home during the same time increasing 138% from $86,000 in 1995, to $205,000 in 2005

Homestead exemptions are only available on an individual’s primary home. Therefore, this exemption does not apply to businesses, rental property, second homes, homeowners claiming permanent residency-based exemptions or tax credits in other states, or homes with owners that do not claim Florida as their primary residence. Because of the "portability" provision of the January 2008 constitutional amendment, a homesteaded owner may now move up to $500,000 of the "Save Our Homes" benefit from one Florida home to the next. However, acquiring a house that had a homestead exemption does not entitle the buyer to retain the low tax rate enjoyed by the previous homesteaded resident, as homestead exemptions cannot be inherited or purchased.

Supporters of the “Save Our Homes” Amendment contend that it allows long term residents with a fixed income to be able to afford to stay in their homes without being driven out by tax increases as their property value increases. Detractors argue that it creates an unfair system of taxation in which first time home buyers, new residents, seasonal residents, and businesses are burdened with more than their share of taxes while homesteaders are trapped in their own homes, often unable to move without doubling their tax rate.

Under Florida law, the homestead exemption is only available to US citizens, permanent resident aliens, or others who are legally able to form the intent to remain permanently under immigration laws.

For the taxation homestead exemption, "Persons Residing Under Color of Law" (PRUCOL -- a term created by the courts -- which applies to persons in the US with asylum or parole status, or someone who has applied for and completed the I-485 application process for a green card but is still awaiting final approval/issuance of the card). A person in the US under an E-, H-, L- or R-class visa is not eligible for homestead, pursuant to Rule 12D-7.007(3), Florida Administrative Code. A person under an H- or L- visa who has an already approved I-140, and is awaiting USCIS retrogressions in order to submit the I-485 application, is not benefited with the homestead exemption. There is a loophole in the system. J-4 visa holders, who are spouses of J-1 visa holders, are assigned an Alien Number. Some counties accept alien numbers as part of the requirements to obtain a homestead exemption, although J- visa holders cannot file for adjustment of status.

Also, in general, a husband and wife in an intact marriage are treated as a single "family unit" under Florida law and are only entitled to a total of one homestead exemption -- no matter how many homes they own and occupy.