Homestead Exemption in Florida

All legal Florida residents are eligible for a homestead exemption in Florida on their homes, condominiums, co-op apartments, and certain mobile home lots if they qualify.  The Florida Constitution provides this tax-saving exemption on the first and third $25,000 of the assessed value of an owner/occupied residence. The Homestead exemption in Florida may refer to three different types of homestead exemptions under Florida law:

  1. exemption from forced sale before and at death
  2. restrictions on devise and alienation
  3. and exemption from taxation

Florida's homestead exemption providing an exemption from forced sale before and at death are among the most protective in the United States as it provides "no limit" to the value of certain real property that can be protected from creditors.

Reduction of Property Taxes

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.  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. 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. 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.

Debtor Protection

Florida's debtor protection homestead provision is one of the broadest in the United States. The value of the property that can be protected is unlimited, so long as the property occupies no more than ½ acre (2,000 m²) within a municipality, or 160 acres (650,000 m²) outside of a municipality. Because of the scope of the protection afforded, persons from other states with heavy debts or large court judgments against them have been known to purchase expensive estates in Florida, a famous example being O.J. Simpson. This strategy has been somewhat impaired by the 2005 Bankruptcy Code amendments.

Protection from Creditors

The homestead exemption offers virtually absolute protection from forced sale to meet the demands of creditors, except under four special circumstances listed below.

One unique feature of Florida's homestead exemption is that it attaches to proceeds from the sale of a home, if the homeowner intends to use those proceeds to establish a new Florida homestead within a reasonable time. Therefore, if the owner of a $1,000,000 home sells that home and puts the money in a bank account, that money is still protected by the homestead exemption, so long as the homeowner has a bona fide intent to use it to purchase another home in Florida entitled to the exemption within a reasonable period of time. This protection is lost if the funds are commingled with other funds not designated for such a purchase. Also, the protection only extends to the amount the owner intends to invest in a new homestead - if the owner of a $1,000,000 home sells that home, and makes clear his intent to purchase a $750,000 home, the remaining $250,000 will lose its protection. (Note: Florida Statute 222.25(4) provides that if the debtor does not claim or receive the benefits of a homestead exemption, the debtor may claim a $4,000 personal property exemption which is over and above the $1000 to which all debtors are entitled pursuant to Florida Statute 222.25(1).

Exceptions for Certain Creditors

Four types of creditors can still force the sale of a homestead to collect debts owed to them. These are:

  1. The State of Florida and its counties or municipalities, to collect past due property taxes;
  2. Parties to whom the property was specifically pledged as credit for a mortgage;
  3. Mechanics who are owed money for work performed in repairing or improving the property.
  4. Any creditor with a lien that pre-dates the establishment of homestead. This usually includes condominium and mandatory homeowner association liens, depending on the language and age of the covenants.

Protection to surviving spouse or minor child

The provision also protects a spouse in several ways. First, it restrains the homeowner from conveying the property without the approval of their spouse, even if the property is entirely in the name of one spouse, or was purchased entirely from funds of one spouse. The provision also prohibits a spouse from devising the property by will, if the homeowner is survived by a spouse or a minor child. If such a devise is made, it is deemed invalid, and the surviving spouse will enjoy a life estate with the remainder to the decedent's children. The surviving spouse may elect to take a 50% interest in lieu of the life estate as long as the election is made within six months of when the homeowner died. The election, in the form of a prescribed form, is recorded in the official record book of the county where the property lies, not with the probate court.[3] If this election is made, the remaining 50% is inherited by the decedent's children. A spouse may waive these rights in writing with respect to the will, but a minor child is not competent to do so. Finally, the homestead exemption for property taxes automatically attaches to the surviving spouse, so the property will never be exposed to the creditors of either spouse because of the death of the other.

Obtaining a Homestead Exemption for Property Taxes

The elected Property Appraisers of Florida's 67 counties are the state constitutional officers responsible for maintaining the integrity of the homestead tax exemption program.  Nobody in Florida "automatically" obtains a homestead exemption. Instead, a homeowner on title must file for a homestead exemption with the Property Appraiser in the county in which the property is located.

Read more here: http://en.wikipedia.org/wiki/Homestead_exemption_in_Florida

How to estimate property taxes: http://www.pcpao.org/estimate_taxes.html

Apply for a homestead exemption in Hillsborough County: http://www.hcpafl.org/hxapplication/greeting.aspx

Apply for a homestead exemption in Pinellas County: http://www.pcpao.org/OLEX_Instructions.html

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