Homestead, the 3% cap, and portability all change what you pay. Here's how they work and what to do before your first bill arrives.
If you’re buying a home in Northeast Florida, there’s one number you’ll see while searching online that I’d be very careful about trusting: the current property tax bill.
You’re buying the property, not its tax history. That bill on the listing reflects what the current owner has been paying, and their situation may look nothing like yours. Once you purchase, the taxable value resets the following year. There’s no way around it, and the gap can be significant.
Homestead and the 3% cap explain the gap. As the buyer of a primary residence who has filed a homestead exemption in Florida, you get two things. The county where the home sits reduces your taxable value by $50,000, and the rate at which that taxable value can climb is capped at 3% per year. If those numbers go in one ear and out the other, here’s what they mean in practice. In a place like Florida, where values have increased pretty dramatically over the last several decades, the value you’re being taxed on and what somebody is actually willing to pay can be two very different things.
Say you find and buy a $700,000 home in Northeast Florida that the previous owner held for fifteen years, and they paid $250,000 or $300,000 for it. The tax bill you get the year after you purchase will be roughly twice what they were paying. Maybe their bill was $3,500 or $4,000, and yours comes in at $8,000 or $9,000. That’s the moment a lot of buyers say, “I wasn’t expecting that.”
“You're buying the property, not the property's tax history.”
New construction can be even more dramatic. Most good builders and most good mortgage brokers involved in a new construction deal will make you aware of this, but in case they don’t, taxes on a vacant parcel of land are dramatically lower than taxes on that same parcel once a home is sitting on it. If you’re working off a $2,000 tax bill and the next year brings a $10,000 one, that’s a rough surprise. You get the property, but the tax future can look very different from the tax past.
Here’s how to capture every benefit you can. First, file your homestead exemption, assuming this is the home you’re living in as your primary residence. Second, if you previously owned a home in Florida, the state does something useful called portability, which lets you transfer some of the benefit you built up in that previous home over to your next one. Depending on how long you owned the last place and what it was worth, the numbers can be pretty large. The math gets complicated, so I’d rather point you to the property appraiser’s breakdown than try to walk through it here.
You can challenge the county’s value. When you buy a home, you get a notice of proposed taxes in August that tells you what the county plans to charge you come November, and it includes their value for that piece of real estate. If you disagree with how they’re assessing it, you can take that up with them. You can bring comparable sales, the property’s condition, photos, and other information to build a case and hopefully lower the taxable value. Your notice of value comes out in August; you can challenge it in September, and the actual bill comes due in November.
To recap, don’t assume the seller’s tax bill will be your tax bill. Homestead and portability can make a real difference in what you pay every year on your primary residence. And you can challenge the assessed value the county places on your property, as long as you watch the timing in your particular county.
If you’re thinking about buying in Northeast Florida and you want a clear picture of what your actual carrying costs will look like before you get too far down the road, I’m happy to walk you through it. Give me a call at 904-405-1995, email me at jeff@pursuitrealestate.com, or visit pursuitrealestate.com. I’d rather you know the number going in than find out in November.
