Florida’s Homestead Tax Exemption

I think that there is a misconception about Florida’s homestead tax exemption because, particularly for a luxury home in South Florida, it seems like the exemption is insufficient. If you buy a $5,000,000 home on the water and claim it as your primary residence, then of course you would want to be able to exclude more than the $50,000 exemption amount that is allowed for a married couple! While the tax exempt amount feels small, claiming your homestead exemption is so important because it keeps your tax rate from ballooning from one year to the next. The Miami-Dade Property Appraiser’s website has what I think is a very good explanation of the homestead tax exemption, check it out below:

Understanding Amendment 10 will help you avoid being surprised by higher real estate taxes. Amendment 10 was born in 1992 when voters amended the Florida Constitution so that the Assessed Value of properties with Homestead Exemption (HEX) are capped at 3% or the Consumer Price Index (CPI), whichever is less.

The key to understanding Amendment 10 is the chain of events triggered by the title change of a home with HEX – such as when a home sells. First, the cap is removed from the Assessed Value. As a result, the Assessed Value (see 5 below) may increase. If the Assessed Value rises, then so does the Taxable Value (see 6 below). And when the Taxable Value increases, the taxes of your home may jump.

As you can see, HEX and the Amendment 10 cap are linked. HEX is not transferable. However, a new homeowner may inherit the previous owner’s HEX. (If HEX is granted, it is only to the owner of record as of January 1.) If the buyer does inherit HEX, the Assessed Value remains capped only for the current year.

When the cap is removed the next year, the Assessed Value equals the Market Value... If the Market Value of your home is currently higher than the Assessed Value of previous years, there is no escaping a rise in the Assessed Value. Once the Assessed Value increases, so too, does the Taxable Value of your home.

When the Taxable Value rises, typically the real estate taxes increase... For the uninformed, the tax surprise can arrive on the first bill if the buyer did not inherit the seller’s HEX or on the subsequent bill if the buyer did inherit HEX.

To understand when the Assessed Value of your new home is capped, you must know your Base Year. The first year that a homeowner applies for and receives HEX is called the Base Year. The cap is only applied to the Assessed Value in the years following your Base Year. In the Base Year the law requires that the Assessed Value equal the Market Value.

If, as a new owner, you want to receive HEX, then you must apply for HEX on or before the March 1 deadline of the next year. The cap remains so long as the title remains unchanged and the homeowner continuously receives HEX on the same home. (For exceptions see Chapter 193.155, Florida Statutes.) New construction, alterations or improvements are not capped the first year they are placed on the tax roll but are thereafter.

For more information, check out https://www.miamidade.gov/pa/amendment_10.asp.