Real Estate Assessment Portability in Florida

IMG_9119[1]Florida has a long history of manipulating the ad valorem taxes for its property owners.  Some of these include the amount of the homestead exemption, save our homes benefit. (limits the increases in assessed value to 3% or Consumer Price Index (CPI) whichever is less), and the latest is portability, also known as the “Transfer of Homestead Assessment Difference”, is the ability to transfer the dollar benefit of the Homestead CAP from one Homestead to another. The Homestead CAP is the difference between market or just value and assessed value, often known as the Save Our Homes Benefit. You may only go only one tax year without having a homestead exemption in order to transfer your CAP.

General Information

  • There are time limits that apply – you may transfer your CAP as of January 1 of either of the 2 immediately preceding years.
  • Homestead Exemption Application required, along with the Transfer of Assessment Limitation Application (DR-501T “Transfer of Homestead Assessment Difference” application)
  • The maximum amount of CAP transfer from a single homestead is $500,000.
  • The portability benefit is based on a precentage of the difference between the just value and assessed value of the property.   Thus, the benefit is maximized when a property owner “upsize” (buying a higher valued property), but still benefits from “downsize” (buying a lower valued property) too (although not as much).
  • It can be used an unlimited number of times.
  • The Taxable Value is multiplied by millage, which is determined by local government each year.  This just shifts the tax burden to other property owners.
  • Applies to all Florida counties.

Conclusion

Although most people think that these changes help them to reduce their real estate tax burden, it appears to be more favorable for the richest property owners with not only limits the increases of assessed values (under save our homes) and portability favoring higher priced real estate.  In addition, the property appraiser has to hire more people to oversee the calculation of these changes.

In the Real Estate Market?

KW1784102f20KW.jpgYou should consider using a realtor.  I could save you money especially with new home builders and it does not cost you anything.  So why not? Let me save you money!!!  If you are interested in buying real estate (new home, existing home, or commercial property), please contact me (Alan Lane with Signature Realty Associates at 2234 Lithia Center Lane, Valrico, Florida).  

As a life long resident of Central Florida, I can help you find the right property for you whether it is in Orlando or as far south as Sarasota.  My email address is alanlane66@gmail.com, or call me at 813.205.9280.  If you are just starting your search, you can search the MLS for real estate opportunities on my website at this link.

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Why Not Buy instead of Pay Rent?

818 Hickory GlenFlorida’s new home prices may be rising (a sign that the housing market is improving), but that shouldn’t turn you away from becoming a homeowner. However, falling mortgage rates (at historical low levels) have kept buying affordable when compared to renting. Why pay off the landlord’s mortgage every month, when you could own your own home and take advantage of tax savings from mortgage interest deductions and real estate taxes?

Everyone in the market thinks about the price they are willing to pay instead of the buying power at today’s low interest rates.  Did you know that the principal and interest monthly payment on a 30 year, $100,000 mortgage is only $449.04 per month? Even if interest rates increase to 4%, the principal and interest monthly payment would only be $477.42. If your payments started in January, you would pay $3,968 in interest for the first year in the home. That entire amount is deductible on your federal income tax return! Assuming you are in the 27.5% tax bracket, you would save $1,091 in taxes, or $91 per month. So your $477 payment is really only $386 when you factor in the homeowner’s tax advantage.

Since one of the biggest hurdles to home ownerships (especially first time home buyers) is coming up with the down payment. There are programs to help buyers like USDA financing programs as well as some government agencies offering down payment assistance.

New Homes Advantage

Buying a new home from a new home builder has some advantages over a buying a presale. The new construction advantages include home warranties, lower building insurance, sales incentives (ranging from upgraded kitchens to bathrooms) and closing costs (most (if not all) of the closing costs are included if the builder’s approved lender is used). We can help you find the right home with the right home builder (i.e. Authur Rutenberg, Ashton Woods, Beazer Homes, Cardel Homes, Centex Homes, D.R. Horton, David Weekley Homes, Homes by Westbay, K Hovnanian, Lennar Homes,  Ryan Homes, and Sabal Homes).

Thinking of buying real estate?  You should consider using a realtor.  If you are interested in buying real estate (new home, existing home, or commercial property), please contact me (Alan Lane with Keller Williams Realty at 2119 W Brandon Blvd, Brandon, Florida  33511).  As a life long resident of Central Florida, I can help you find the right property for you whether it is in Lakeland or as far south as Sarasota.  The Keller Williams offices of  ”Suburban Tampa” include the offices in Brandon, Plant City, Fishhawk Ranch, and our newest office in Valrico.  My email address is alanlane66@gmail.com, or call me at 813.205.9280.  If you are just starting your search, you can search the MLS for real estate opportunities on my website at this link.

Benefits of Homeownership

During this time of year, the financial benefits of homeownership are evident with write offs for mortgage interest, real estate taxes and some closing costs deductions likes points on a new loan (or origination fees). There are other benefits to home ownership like the following:

1. Buying Is Cheaper than Renting In the Long Term

Although in the first few years, it may be cheaper to rent. If you don’t take money out (i.e. by refinancing the property), over time as the interest portion of your mortgage payment will decrease the principal portion (or equity portion) that you pay will eventually be lower than the rent you would have been paying. Your equity in your home is the amount of money you can sell it for minus what you still owe on it. But most importantly, you are not paying your landlord’s home or building’s mortgage, you are paying off your own property!

2. Homeownership Builds Equity Over Time

Although this past decade of real estate market’s bust has reduced homeowner’s confidence, it is why it’s so important the new “Qualified Mortgage” rules versus some of these liar loans of the past where you did not have to prove that you had the financial means to pay the mortgage payment. The way mortgages work is that the principal portion of your payment increases slightly every month year after year. It’s lowest on your first payment and highest on your last payment. Thus, your equity grows the faster that you pay off the loan!

3. Mortgage Tax Deduction Benefits

  • Mortgage deduction: The IRS tax code allows homeowners to deduct the mortgage interest from their tax obligations. This can be a huge deduction and can make the difference between claiming a standard deduction versus itemized deductions. Most people look at this benefit as one of the best benefits of home ownership.
  • In addition to your mortgage interest, you can deduct the interest you pay on a home equity loan (or line of credit).
  • Some closing cost deductions: The first year you buy your home, you are able to claim the points (also called origination fees) on your loan, no matter whether they are paid by you or the seller.
  • Property tax is deductible: Real estate property taxes paid are also deductible on your primary residence and a vacation home is for income tax purposes.

4. Capital Gains Exclusion

If you buy a home to live in as your primary residence for more than two years then you will qualify. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes.

5. Appreciation

Homes have traditionally been considered a safe investment, with values that rise moderately over time.  According to the NAR (National Association of Realtors), “the national median home price has risen every year (even during recessions and periods of sales declines) since 1968. Typically, the values appreciate at the rate of inflation, plus 1 or 2 percentage points. Sometimes it’s a greater increase. In 2004, for instance, the median price went up by 9.4 percent.”

6. A Mortgage Is Like a Forced Savings Plan

Paying a mortgage every month and reducing the amount of your principal is like a forced savings plan. Each month you are building up more equity in your home. In a sense, you are being forced to save assuming the market remains stable.

If you are interested in buying a new home or an existing home, please contact me (Alan Lane with Keller Williams Realty at 2119 W Brandon Blvd, Brandon, Florida  33511) and I can help you find a new home in the Tampa Bay Area.  The Keller Williams offices of  ”Suburban Tampa” include the offices in Brandon, Plant City, Fishhawk Ranch, and our newest office in Valrico.  My email address is alanlane66@gmail.com, or call me at 813.205.9280.  If you are just starting your search, you can search the MLS for homes on my website at this link.

Did you buy a Home Last Year in Florida? You might want to Apply for a Homestead Exemption.

If you bought a home last year, the dead line to file for homestead exemption is March 1st.  Every person who owns and resides on real property in Florida on January 1 and makes the property his or her permanent residence can file an application for an homestead exemption and may receive an additional property tax exemption up to $50,000.  The first $25,000 applies to all property taxes. The added $25,000 applies to assessed value over $50,000 and only to non-school taxes.

With a Homestead Exemption, a property owner can benefit from Save our Homes.  Starting the year after you receive homestead exemption, the assessment on your home cannot increase by more than the lesser of the change in the Consumer Price Index or 3% each year, no matter how much the just value increases. If you have moved from one Florida homestead to another within the last two years, you may also be eligible to take some of your Save our Homes savings with you.   Exceptions to that limitation include new additions or construction. Another exception occurs when ownership of a homestead property is changed in any way, affecting the homestead. Assessed value then returns to fair market (just) value in the year following the change.

There are $500 exemption each for widows, blind and disabled. Veteran’s and First Responders Exemptions and Discount are also considered and can result in up to 100% exemptions in ad valorem taxes (Latin for “according to value”).

Florida has a lot of potential savings when it comes to ad valorem taxes for property owners that new home owners should take advantage of.  The March 1st deadline is fast approaching. 

If you are interested in buying a new home or an existing home, please contact me (Alan Lane with Keller Williams Realty at 2119 W Brandon Blvd, Brandon, Florida  33511) and I can help you find a new home in the Tampa Bay Area.  My email address is alanlane66@gmail.com or call me at 813.205.9280.  If you are just starting your search, you can search the MLS for homes on my website at this link.

Assessed Value of Real Property in Florida

An enlargeable map of the 67 counties of the s...

An enlargeable map of the 67 counties of the state of Florida (Photo credit: Wikipedia)

In Florida, each county has an elected Property Appraiser that is official charged with the duty and responsibility to appraise all of the property in the County.  This includes real property (real estate) and tangible personal property (the equipment, machinery and fixtures) of businesses. The Property Appraiser prepares the tax roll, but does not collect taxes or determine tax rates.  Thus, the assessed value represents only a portion (or part of the equation) of the overall real estate taxes paid by property owners.

Have you ever wondered why your home is assessed below what you could sell it for?  There could be several reasons (i.e the difference in value definitions as well as the date of value).

1) There is a difference in the value definitions (Market Value versus Just Value or Fair Market Value).  In the State of Florida, real estate is assessed at 100% of the property appraiser’s estimate of “fair market value”.  However, in reality, assessments are typically somewhat lower than actual market values in order to account for the cost of sale and purchase as outlined in the Florida Statutes 193.011 as factors one and eight.  These costs could include sales commissions, reasonable financing costs, etc.

2) The date of value is January 1st of each year for just value.  Whereas, market value could be any date.  Depending on the market that you are in a declining, stable or increasing market, there could be a major difference.  For example, a stable market might not show a remarkable difference.  Whereas, the increasing or decreasing market could significantly show a difference in value.

Market Value is defined by The Appraisal Institute in their basic text; The Appraisal of Real Estate, 13th Ed., p.23 as: “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.”

The following is a value definition used in determining just value:

193.011 Factors to consider in deriving just valuation.–In arriving at just valuation as required under s. 4, Art. VII of the State Constitution, the property appraiser shall take into consideration the following factors:

(1) The present cash value of the property, which is the amount a willing purchaser would pay a willing seller, exclusive of reasonable fees and costs of purchase, in cash or the immediate equivalent thereof in a transaction at arm’s length;

(2) The highest and best use to which the property can be expected to be put in the immediate future and the present use of the property, taking into consideration the legally permissible use of the property, including any applicable judicial limitation, local or state land use regulation, or historic preservation ordinance, and any zoning changes, concurrency requirements, and permits necessary to achieve the highest and best use, and considering any moratorium imposed by executive order, law, ordinance, regulation, resolution, or proclamation adopted by any governmental body or agency or the

Governor when the moratorium or judicial limitation prohibits or restricts the development or improvement of property as otherwise authorized by applicable law. The applicable governmental body or agency or the Governor shall notify the property appraiser in writing of any executive order, ordinance, regulation, resolution, or proclamation it adopts imposing any such limitation, regulation, or moratorium;

(3) The location of said property;

(4) The quantity or size of said property;

(5) The cost of said property and the present replacement value of any improvements thereon;

(6) The condition of said property;

(7) The income from said property; and

(8) The net proceeds of the sale of the property, as received by the seller, after deduction of all of the usual and reasonable fees and costs of the sale, including the costs and expenses of financing, and allowance for unconventional or atypical terms of financing arrangements. When the net proceeds of the sale of any property are utilized, directly or indirectly, in the determination of just valuation of realty of the sold parcel or any other parcel under the provisions of this section, the property appraiser, for the purposes of such determination, shall exclude any portion of such net proceeds attributable to payments for household furnishings or other items of personal property.

History.–s. 1, ch. 63-250; s. 1, ch. 67-167; ss. 1, 2, ch. 69-55; s. 13, ch. 69-216; s. 8, ch. 70-243; s. 20, ch. 74-234; s. 1, ch. 77-102; s. 1, ch. 77-363; s. 6, ch. 79-334; s. 1, ch. 88-101; s. 1, ch. 93-132; s. 1, ch. 97-117; s. 1, ch. 2008-197.

1Note.–Section 7, ch. 2008-197, provides that “[i]t is the express intent of the Legislature that a taxpayer shall never have the burden of proving that the property appraiser’s assessment is not supported by any reasonable hypothesis of a legal assessment. It is the further intent of the Legislature that any cases of law published since 1997 applying the every-reasonable-hypothesis burden of proof to uphold the property appraiser’s assessment are expressly rejected to the extent that they are interpretive of legislative intent.”

If you are interested in buying a new home or an existing home, please contact me (Alan Lane with Keller Williams Realty at 2119 W Brandon Blvd, Brandon, Florida  33511) and I can help you find your dream home in the Tampa Bay Area.  My email address is alanlane66@gmail.com or call me at 813.205.9280.  If you are just starting your search, you can search the MLS for homes on my website at this link.

After the Sale Items to Consider in Florida

Florida

Florida (Photo credit: scottkellum)

There are several things to consider after the sale in Florida.  These include but are not limited to warranties, major purchases, and tax exemptions.   Some of these items include the following:

  1. Most warranties require that you call them before hiring a subcontractor or they will not pay for the repair.  In other works, most warranty companies have their own contractors with negotiated prices that allow them to limit their downside of repair items.  New home builders typically give up to one year on all items.
  2. You can purchase that new furniture for your home now.  Prior to closing on your home, a lender will run a second credit check to see if your debt-to-income ratios are still within range.  Thus, it is very important not to buy any furniture or cars prior to closing on your home.
  3. One of the best benefits to Florida home owners is the homestead exemption.  There are several exemptions available to property owners (i.e. homestead exemptions, widow or widower exemptions, totally and permanently disabled exemptions, blind exemption, quadriplegic exemption, veteran exemptions, etc.). Florida Amendment One, also known as the “Portability of Save Our Homes” Amendment, was a constitutional amendment on the on the January 29, 2008 election ballot in Florida that was approved. The original “Save Our Homes” Amendment was passed in 1992 and took place in 1995. That measure put an annual cap of 3 percent on increases in assessed home values for property taxes. However, a loophole in the Save Our Homes Amendment lost the property tax cap for Floridians who move to a new home. This “portability” measure closed that loophole. With respect to homestead property, this revision: (1) increases the homestead exemption except for school district taxes and (2) allows homestead property owners to transfer up to $500,000 of their Save-Our-Homes benefits to their next homestead. With respect to nonhomestead property, this revision (3) provides a $25,000 exemption for tangible personal property and (4) limits assessment increases for specified nonhomestead real property except for school district taxes.[1] Any widow or widower who is a Florida resident may claim a $500 exemption. A Florida resident who is totally and permanently disabled may qualify for a $500 exemption. A Florida resident who is blind may qualify for a $500 exemption. Real estate used and owned as a homestead by a quadriplegic, less any portion used for commercial purposes, is exempt from all ad valorem taxation. Taxes are assessed as of January 1 of each year and are normally due and payable on November 1 of that year (a 4% discount is applied) and pay the taxes before April 1 of the following year. Taxes become delinquent April 1 at which time 3% interest and advertising costs are added.

[1] NO. 1 CONSTITUTIONAL REVISION ARTICLE VII, SECTIONS 3, 4, AND 6 ARTICLE XII, SECTION 27

Florida Real Estate Taxes

Ad Valorem Taxes

An ad valorem tax (Latin for "according to value") is a tax based on the value of real estate or personal property. Florida Statutes 193.011 outlines eight factors that the property appraiser must consider in arriving at the “fair market value” that include the three traditional approaches to value. Each property is re-assessed annually and has to be inspected at least once every three years. In the State of Florida, real estate is assessed at 100% of the property appraiser’s estimate of “fair market value”. However, in reality, assessments are typically somewhat lower than actual market values in order to account for the cost of sale and purchase as outlined in the Florida Statutes 193.011 as factors one and eight.

Exemptions

There are several exemptions available to property owners (i.e. homestead exemptions, widow or widower exemptions, totally and permanently disabled exemptions, blind exemption, quadriplegic exemption, veteran exemptions, etc.). Florida Amendment One, also known as the "Portability of Save Our Homes" Amendment, was a constitutional amendment on the on the January 29, 2008 election ballot in Florida that was approved. The original “Save Our Homes” Amendment was passed in 1992 and took place in 1995. That measure put an annual cap of 3 percent on increases in assessed home values for property taxes. However, a loophole in the Save Our Homes Amendment lost the property tax cap for Floridians who move to a new home. This “portability” measure closed that loophole. With respect to homestead property, this revision: (1) increases the homestead exemption except for school district taxes and (2) allows homestead property owners to transfer up to $500,000 of their Save-Our-Homes benefits to their next homestead. With respect to nonhomestead property, this revision (3) provides a $25,000 exemption for tangible personal property and (4) limits assessment increases for specified nonhomestead real property except for school district taxes.[1] Any widow or widower who is a Florida resident may claim a $500 exemption. A Florida resident who is totally and permanently disabled may qualify for a $500 exemption. A Florida resident who is blind may qualify for a $500 exemption. Real estate used and owned as a homestead by a quadriplegic, less any portion used for commercial purposes, is exempt from all ad valorem taxation.

Non-Ad Valorem Assessments

Non-Ad Valorem Assessments are taxes that are not based on value. Some examples include storm water, solid waste, and CDD (Community Development District) fees. Taxes are assessed as of January 1 of each year and are normally due and payable on November 1 of that year (a 4% discount is applied) and pay the taxes before April 1 of the following year. Taxes and non-ad valorem assessments become delinquent April 1 at which time 3% interest and advertising costs are added.


[1] NO. 1 CONSTITUTIONAL REVISION ARTICLE VII, SECTIONS 3, 4, AND 6 ARTICLE XII, SECTION 27