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Florida Passes Property Tax Reform Package

The latest version of property tax reform was passed by voters January 29, 2008.

How it works- Nov 1 2007

TALLAHASSEE, Fla. – Nov. 1, 2007 – The Florida Legislature, caught in a game of “chicken,” approved a measure that will appear before voters on the Jan. 29, 2008, ballot. With time working against them, lawmakers agreed on a measure that scaled back earlier initiatives, and even current reforms pushed by the House.

What the current amendment includes:

Homestead exemption

The homestead exemption increases. The current $25,000 homestead exemption remains; but a second $25,000 exemption is added for home values over $50,000. The second $25,000 exemption does not apply to school taxes, however, which translates into a lower-than-expected savings of about $240 per homesteaded owner. The portion of a home valued between $25,000 and $50,000 will still be taxed at all levels.

Portability – Moving up

Property tax savings portability (money saved over time on property taxes because of yearly increase limits through Florida’s Save Our Homes amendment) applies to homesteaders (homeowners with a homestead exemption) moving anywhere within Florida. Up to $500,000 of accumulated savings, applied to taxable value, may be transferred when one home is sold and another is purchased, with the transfer applying to all taxes, including the school portion. Homeowners have two years after they sell a home to buy a new one and transfer the savings.

If buying a more expensive home, a homesteader calculates savings by subtracting the assessed value (taxable value) from the just value (market value). The amount (savings over time) is then subtracted from the just value on the new home purchased. In most cases, the $50,000 homestead exemption will also be subtracted.

Example: Susie currently owns a home and has lived there for a long time. The house’s just value is $500,000, but because of Save Our Homes, the assessed value is only $200,000. Susie buys a new house for $700,000. The following year, she’ll pay taxes on only $400,000, however, because she’s “porting” $300,000 in value to her new home. After factoring in the new homestead exemption of $50,000, her total assessed value would be $350,000.

If buying a less-expensive home, the calculation changes and is based on the percentage of tax savings rather than a dollar amount. If the assessed value on the original home was 50 percent of the just value, for example, the homesteader would transfer that percentage to the new home, or have a new assessed value that is 50 percent of the new home’s just value. The percentage system was created to keep homesteaders from effectively eliminating their property taxes altogether by moving from a high-cost area of Florida to a low-cost area – a change that could severely hurt smaller rural economies.

Example: Susie currently owns a home and has lived there for a long time. The house’s just value is $500,000, but because of Save Our Homes, the assessed value is only $200,000. Susie buys a new town home for $300,000. She’ll pay taxes only on $120,000 because when buying down in value, she’ll keep the same ratio (40 percent) of assessed value to just value that she enjoyed in her old home. After factoring in the new homestead exemption of $50,000, her total assessed value would be $70,000.

Also, portability is retroactive to Jan. 1, 2007 – so everyone who bought this year and moved from an established homestead will be able to “port” their savings for next year. Since yearly tax values are based on ownership as of Jan. 1 each year, portability would not affect this year’s tax bills, which most homeowners have already received; but the savings will be applicable to next year’s tax bill.

Non-homesteaded property tax cap

An important piece of the amendment is a 10 percent annual assessment cap on non-homestead property. Similar to Save Our Homes, this cap limits the assessed increases of commercial, rental and second home property taxes to a maximum amount of 10 percent per year starting in 2009, protecting against high spikes in taxes from year-to-year.

While property values will not rise 10 percent every year, FAR believes the cap offers some relief and protection to properties in high-value markets and waterfronts from unpredictable tax increases. The Constitution mandates a tax reassessment to just value upon transfer for non-homestead residential properties of nine units or less, but allows the Florida Legislature to determine how reassessment will occur for commercial and higher-unit residential properties. However, implementing legislation passed during the Special Session provides for reassessment of these properties upon a change in ownership or use.

Tangible personal property exemption

Under the amendment, the Tangible Personal Property (TPP) exemption for businesses is $25,000. The Legislature estimates that this tax – paid to local governments on items such as shelving, desks, computers, and other office equipment – will exempt about 1 million of Florida’s 1.2 million businesses that currently pay it. The amendment also drops the requirement to file for the TPP tax.

Work not done

While the proposed amendment will save property owners as much as $12 billion (depending on the portability amount used), FAR will work for greater relief measures. The association also has serious concerns about a challenge to the constitutionality of portability.

Earlier versions of property tax reform included provisions to help first-time homebuyers, a move missing in the current version. With that protection gone, FAR considers it possible that it will be challenged under the U.S. Constitution along with the entire Save Our Homes property tax system. If that happens, it could bring everyone back to the table yet again.

FLORIDA ASSOCIATION OF REALTORS®

Click the “more” tag to read about earlier versions that failed.

Older Versions

The Florida Legislature passed a historic property tax relief and reform package yesterday that will cut property taxes for property owners in Florida by almost $32 billion dollars statewide over the next five years.

From www.100ideas.org:

Last week, the Legislature passed a historic property tax relief and reform package that will cut property taxes for property owners in Florida by almost $32 billion dollars statewide over the next five years. We have a simple message for Florida’s property owners: help is on the way. The $32 billion dollars in relief will make a real difference in the lives of Floridians – this isn’t just a first step forward, it is the first giant leap forward – still, I believe more can be done. There is more waste that can be cut from government, government can provide greater value to the taxpayers, there are more taxpayer protections that must be put in place, and there are greater tax savings that this Legislature can provide to Floridians.

The centerpiece of the plan is the constitutional amendment that Florida voters will vote on January 29, 2008. House Joint Resolution 3B will provide the greatest savings for Florida’s homeowners by creating a “Super Homestead” exemption which will provide an average 44% reduction on most home-owners tax bills.

The constitutional amendment eliminates inequities in our current property tax system, provides Tangible Personal Property (TPP) tax relief to Florida’s businesses and eliminates 77% – more than $1 million – of Florida’s small businesses from the TPP tax rolls, helps businesses by pumping more money into our economy, and helps non-homestead owners by lowering the barriers to homeownership, and lets property owners choose how their homes will be taxed in the future.

The property tax relief and reform package approved yesterday also includes a statutory tax relief bill, House Bill 1B, that will immediately cut taxes and cap future tax increases for all property owners; limit local governments’ ability to unnecessarily raise taxes in the future; and provide immediate savings to homeowners, second homeowners, and commercial property owners. The only limits to our future success as a state are the unfair limits government applies to our people through unnecessary taxation – it will be the charge of the House of Representatives, as long as I preside over it, to destroy those barriers to prosperity. Sincerely, Marco Rubio Speaker, Florida House of Representatives The bills approved yesterday:

HJR 3B by Representative Cannon “Property Tax: Constitutional Relief & Reform”

  • Offers $16 billion of tax relief over five years.

The savings by property type in 2008 are:

  • Average Homestead switching from Save Our Homes: 44% ($1,306)
  • Average Non-homestead Residential: 8% ($245)
  • Average Commercial/Industrial: 8% ($1,240)
  • Average Tangible Personal Property savings: 17% ($262)
  • Allows homeowners to choose between Save Our Homes or the new plan.
  • No one will lose their current Save Our Homes protections unless they choose to.
  • Homeowners will be allowed to choose between their current Save Our Homes protections or the new, “Super Homestead” and expanded taxpayer protections under the constitutional amendment.
  • This creates a form of portability for homeowners who would otherwise lose significant tax savings when they move.
  • Rather than starting over with only a $25,000 homestead exemption and zero Save Our Homes protections, the homeowner would immediately have a homestead exemption up to $195,000 as soon as they move in.
  • Creates a new “Super Homestead” exemption to transform the inequitable Florida property tax system.
  • The new exemption covers 75% of the first $200,000 of value and 15% of the next $300,000.
  • Thus, the maximum super exemption is $195,000.
  • All homesteads will receive at least a $50,000 exemption.
  • Qualifying low-income seniors will receive at least a $100,000 exemption.
  • The upper $500,000 threshold is indexed to grow with changes in Florida personal income, which generally increases 4% per year.
  • Authorizes a new $25,000 Tangible Personal Property (TPP) exemption for businesses.
  • This creates immediate savings of hundreds of dollars for TPP-paying business owners.
  • It also eliminates the administrative burden of filing a tax return for $1 million of Florida’s 1.3 million businesses that pay tangible personal.
  • Authorizes targeted relief for affordable housing and working waterfront properties. Implements tax reform and relief for 2008 tax bills, provided the Legislature votes for a special election in January 2008 (HB 5B).

HB 1B by Representative Attkisson Property Tax: Immediate Statutory Relief”

  • Creates meaningful and immediate tax relief for all properties in Florida this year.
  • Homestead property owners save an average of 7% ($174).
  • Non-homestead residential property owners save an average of 7% ($199).
  • Commercial/industrial property owners save an average of 6% ($941).
  • Tangible personal property taxpayers save an average of 6% ($92).
  • Requires all local governments except school districts to cut taxes this year.
  • First, cities, counties, and independent special districts must reduce taxes for the 2007-2008 Fiscal Year by adopting the 2006-2007 tax levy, adjusted for new construction (i.e., adopt the rolled-back rate).
  • Next, cities and counties must further reduce taxes by a factor based on whether they have recently levied property taxes responsibly or excessively, compared to a statewide average. The reduction factor will be 3%, 5%, 7%, or 9%.
  • All independent special districts are required to implement the 3% reduction factor.
  • Requires all local governments except school districts to cap annual property tax revenue growth.
  • Property tax revenue growth will only be allowed to increase in proportion to population growth (i.e., new construction) and growth of Florida personal income (which averages 4% annually).
  • A revenue cap creates unprecedented protections for all Florida properties – especially commercial properties and non-homestead residential properties, which currently have no specific protection.
  • Protects taxpayers while allowing local flexibility by requiring a rigorous procedure to override the required revenue cap.
  • Depending on the extent to which the local authority wants to exceed the revenue cap, varying supermajority votes are required.
  • A slight increase requires a 2/3 vote, while a larger increase will require either a unanimous vote or approval by local voters.
  • Implements provisions authorized in the constitutional reform plan (HJR 3B).
  • The implemented provisions are:
  • The new “super” homestead exemption.
  • The new homestead exemption for low-income seniors.
  • The grandfathering provisions that allow certain homeowners to maintain Save Our Homes benefits.
  • Homeowners will be allowed to choose between their current Save Our Homes protections or the new, “Super Homestead” and expanded taxpayer protections under the constitutional amendment.
  • The new tax protections for affordable housing.
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10 Comments Post a comment
  1. Joe #

    This proposal is designed to help home builders. It will further cut taxes thereby reducing services. It is designed to eliminate the Save Our Homes Cap. Anyone who choses to give up their Cap is mistaken. It ius like an Adjustable Rate Mortgage (ARM). It seems attractive up front but gets very expensive aft three years. See this website http://www.pcpao.org/

    September 18, 2007
  2. Dewey Duncan #

    Currently we are Virginia residents. In April 2006, we visited Florida in high hopes of purchasing a home in the Orlando area. After learning what the monthly real estate tax payment would be a delay in plans was required. Based on the current proposed tax reform bill, what would be the monthly tax payment for a home purchased for $450.000?

    September 6, 2007
  3. As a small business owner (Wedding Photography in Fort Myers) I was really hoping for more…

    June 29, 2007
  4. LC from Michigan #

    Sounds like it is “WE” against “THEY” to me. As a non-homestead owner of a second home which I use only 4 months of the year, I feel like I will be paying an unfair share of the property taxes. I propose that anyone who can identify with me limit the amount you spend in stores and restaurants, thereby keeping them out of your pockets. Do it as a protest, show our power. We appreciate the sunshine—thank you.

    June 25, 2007
  5. bullish2bearish #

    I’m very unsatisfied with the proposed tax reform bill. It’s never wise to get your hopes up when it comes to relying on politicians to offer relief to the masses. Knowing this, I still got my hopes: Shame on me!

    The good side is that the proposed measure , if passed, will give real estate a much needed shot in the arm.
    If worse goes to worse, I can always do what everyone else is doing and move to N. Carolina or Tennessee and build a small fortress with the poceeds from the sale of my modest S. Florida home.

    June 24, 2007
  6. Domingo #

    Well, they increased my property tax from $1764.41 up to $2490.76, in one year (2005-2006). This is a $726.35 increase, BUT i have now Thanks a lot, a possible reduccion of $150. Sounds like a SUPER SPECIALS that retairles offered to the costumers.

    June 21, 2007
  7. Good question. Right now, it looks like non-homesteaded owners would get a break, but not much and not large enough in our minds. 7-8% “savings” in 2008 is what they are reporting now. We’ll post updates as the get clarified.

    June 19, 2007
  8. ellen cimmino #

    So what is the impact on non homestead second home owners. We have owned a 2bed 2bath condo for 13 years and are thinking of moving to something bigger as we spend more time in Florida. (only 3 months)

    Would we be able to take advantage of any of these changes?

    June 19, 2007
  9. Thanks Mike. Agreed, at least something is happening, watered down as it is. We’ll be first in line right with ya!

    June 19, 2007
  10. Captain Mike #

    It is a start. A lot more relief is needed though. I will vote in January and I hope most Floridians will also.

    June 19, 2007

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