Florida’s property taxes can be a little complicated to understand if you’re not familiar with the property market in the area. Tax laws in Florida differ from other countries because there is no personal income tax that is charged.
If you’re looking to buy property in Florida for the first time, it would be helpful to understand how the tax system works and how it will affect your new property; whether you plan to live in the house or hold it as an investment.
Let’s look at the basis of the Florida tax system and how property tax is determined and why Florida is regarded as having a lenient approach to its taxes.
Current Florida Taxes
Florida is known to have one of the most lenient tax systems on residents.
- Florida is only 1 out of 7 states in the U.S that does not charge its citizen’s personal income tax. However, citizens do need to pay federal income taxes.
- Estate tax or inheritance tax does not apply and no portion of this goes to the state. Any costs associated with the sale or inheritance of a property should be stipulated in the estate plan set up with an estate planning lawyer.
- Residents do not need to pay intangible tax on variables such as investments.
Three major taxes are collected: sales and use tax, and corporate income tax.
There is a rate of 6% on the sale or rental of goods. There are exceptions on groceries and medicine.
Use tax applies for internet usage and out-of-state purchases. This will be charged regardless of the tax was charged at the time of purchase. This is mostly applicable when items were brought in or delivered from outside Florida.
Corporate Income Tax
The state imposes a 5.5% rate on corporate income tax. This is applicable for corporations and artificial entities or businesses that earn or receive income in Florida. Sole proprietorships, individuals, estates of decedents and testamentary states do not have to file a return.
Property Tax In Florida
The state government does not collect property taxes but rather local governments. As of January 1st, every year county property appraisers will assess properties in their county and send an annual Notice of Proposed Property Taxes to property owners. This is done in August and the rates are based on the value of the property.
Year-on-year, increases in the value of homes are limited to 3% of the previous year.
Tax rates are determined according to millage rates which are set by the local government.
10 mills = 1%
Millage rate x property value = total property tax owing
There are property tax reductions available for:
- Married Taxpayers
- Homestead Exemptions– exemptions up to $50,000 are made available but only the first $25,000 applies to all taxes. The other $25,000 applies to non-school taxes.
- Senior citizens over 65 – these exemptions are available up to $50,000 for homeowners earning a gross income of less than $20,000 a year.
- Total and Permanent Disability Exemptions – homeowners with total and permanent disability qualify. Quadriplegics that use their home as a primary residence are exempt from paying any property tax. Wheelchair users for mobility with a gross income below $14,500 are also exempt.
- Veterans Exemptions- these exemptions exist in various forms that are applicable for different circumstances based on their age, the reason for exiting, disability as a result of service and length of service.
- Widows and Widowers – granted they have not remarried or were divorced at the time of the deceased passing away. There is an exemption of $500 available.
- Blind Person Exemption – $500 is available for legally blind residents. If earning less than $14,500 gross income, property taxes are voided.
Change Of Property Ownership
When purchasing a home and changing ownership, your tax bills are likely to be higher than the previous owner. This is because all exemptions will be removed and the value of the home will be reassessed. The assessed value will be equal to the just value. The just value is the market value of the property.
This reassessment will take place on the first of January after the purchase of the property. When changing ownership, the previous owners’ benefits will remain attached to the property for the rest of the calendar year. The following year, exemptions are removed and you as the new homeowner will need to apply for benefits that apply to you.
Before you make your property purchase, even as a long-term investment, we suggest asking as many questions as necessary to feel comfortable about your decision, equipped with the information you need to comply with Florida law.
The real estate attorneys at Handin Law understand this may be a big step for first-time homeowners or young investors. Our suggestion is being aware of how your home will be taxed, an approximate estimate thereof as well as how these taxes might fluctuate and differ.