Divemedic

In 1992, Florida voters were worried about runaway property values causing drastic increases in property taxes from one year to the next. With so many people wanting to move here, property values were climbing rapidly, and this was causing property taxes to skyrocket. Amendment 10 was proposed, which is a benefit of the homestead exemption that provides homeowners protection by limiting the maximum that the assessed value of their home for tax purposes can be raised to 3%, or the CPI, whichever is lower. The Amendment to the state constitution passed, and it became the law of the land in 1995.

How does it work? Like anything that relates to taxes and the government, there is a lot of confusing math involved. Let’s say that you live in a taxing district that taxes your property at a rate of 10 mils, and you bought a starter house at #1 First Ave. for $75,000 in 1993. At the time, the state of Florida had a $25,0000 homestead exemption. You would then owe 10 mils on the $50,000 taxable value of the home, or $500 in property tax each year. Your house was valued at $80,000 in 1994, and you paid $550 in taxes for 1994.

A housing boom hits, prices go way up, and by 1995 your home is now valued at $100,000. Your tax bill would have been $750 (a 50% increase from just 2 years before), but save our homes had gone into effect, so the increase in your home’s assessed value only went from $80,000 to $82,400. That means your property tax was only increased to $574.

Eight more years go by, and you decide in 2003 that you want to sell. Your home is now worth $145,000. Of course, save our homes only has you paying taxes on the assessed value of $104,000, minus your homestead exemption, making your tax bill $790 for the year. Anyhow, you get $150,000 for the place. The tax assessor still says it’s worth $145k, and the guy who buys it will have to pay $1200 in taxes in 2004, assuming the value stays at $145k. (you already paid 2003’s taxes)

You, however, bought your second house at #2 Second Street. You were able to get this one for $240,000. Your portable SOH credit was (145,000-104,000=41,000) so even though the tax guy says this place has a market value of $220,000, you will only have to pay taxes on (220,000-41,000-25,000), making your tax bill $1,540.

Then in 2008, voters approved an amendment that increased the homestead exemption to $50,000 for the non-school portion of property taxes. This complicated things even more, but that is a different topic.

Why do these Amendments keep getting voted on? Whenever the Democrats want more voter turnout, they make sure that something of interest to Democrat voters that will drive voter turnout is on the ballot. Tax cuts in property taxes, legalizing marijuana, increasing the minimum wage, saving baby pigs from the slaughterhouse, things like that.

There is an old saying: a person who is acting as their own attorney has a fool for a client and an incompetent attorney. In this case, we are talking about real estate taxes. We are in the midst of buying a new home. There are a lot of expenses to consider with a move, and taxes are one of them, especially in Florida. Understanding how Florida computes real estate taxes is important, if you want to pay as little in taxes as possible.

This paragraph is specific to how Florida computes real estate taxes. If you aren’t interested in the mechanics of that, you can skip to the next paragraph. When you own real estate in Florida, the county property appraiser assigns your property a “market value” each year. If you live in your home, you can claim it as your homestead, and every year after the first year that you own it, the value can only increase by 3% for taxing purposes, and this amount is called your “assessed value.” The difference between the market and assessed value is called your “Save Our Homes” credit. You subtract your Save Our Homes credit from your market value to arrive at the assessed value, then your homestead exemption ($50,000) from your assessed value, and that is your “taxable value.” The taxing authority where the real estate is located then taxes you on that value, and the amount of tax you own varies by taxing district. (I know that this sounds complicated and it is, but the end result is that there are only 9 states in the US that have a lower tax burden than Florida (we are tied with Louisiana), so there is that.) The reason that I explain this is because the “Save Our Homes” credit is portable, and this is important when moving.

What’s important here is that, when you are moving, you want your old house to be valued as high as possible, and your new house to be valued as low as possible. This will minimize your property taxes going forward. Since we are preparing to move, I got our current home appraised and sent a copy of that appraisal to the county property appraiser’s office. Each August, the appraiser’s office sends every homeowner a copy of the proposed numbers, and you have until September 15 to appeal these numbers. The appraisal that we got from the county was almost $100k less than what the our private appraiser says it is worth. Since this is how our tax credits are calculated, I need to get this fixed, because allowing this to stand will increase our property taxes on the new house by about $2,200 a year for the entire time we own the place.

To do that, you need to apply to the Value Adjustment Board. It’s a sort of tax court that is run by a county magistrate. It’s a legal process, and I think that it is worth our money to hire a real estate tax attorney to handle the process. My wife wants to just do it ourselves because she says lawyers are expensive. My point to her is that we only get one chance to get this right, and screwing it up will cost us more than $22,000 over the next ten years in taxes that we otherwise wouldn’t have to pay. If it costs a grand or two now, a lawyer is well worth the cost going into the future.