[Bogie Shooter]

Originally Posted by jrjr729

Homestead Exemption

Florida residents are exempt from $50,000 of the assessed value of their homes. This means that their real estate taxes will be reduced. However, the amount of the reduction is not simply the millage rate times the $50,000 because not all taxes that make up the real estate taxes are included. The amount that is excluded is school taxes on the second $25,000. For example: Sumter county’s real estate tax rate was 13.8669 mills in 2009 or $13.8669 per thousand in the appraised value. But part of that rate includes a school tax rate of 7.3540 mills. Instead of a tax exemption of $693.35, which would be the benefit if the homestead exemption applied to all taxes, the actual exemption amount is $183.85 less to offset the school taxes. So the exemption actually is worth $509.50.

This is still a nice break, but is it the true value? Not really, because you would have to take into account the effect of the reduction of federal tax deductions if you itemized deductions. Depending on your tax bracket, your federal taxes will increase by an amount equal to your tax bracket times your homestead exemption. Therefore, if you were in the 25% federal tax bracket, the true value of your homestead exemption would be $382.13 or 25% less than its nominal value.

The reason I am pointing this out is to get you to think twice about Florida residency if your only reason is to get the homestead exemption. However, there is another very good reason to consider becoming a Florida resident according to the “Save Our Homes” legislation of which the homestead exemption is a part. Florida homeowners cannot have their real estate taxes rise by more than 3%, or the rate of inflation measured by the CPI, which ever is less. Non-resident homeowners can be faced with as much as a 10% increase. (There is current legislation proposed to drop that to 5%. I believe it is Amendment 3 scheduled for the 2010 ballot.) Still, if you believe that inflation will remain low for the next few years as the economy continues to battle the recession, there is less of a need to rush into Florida residency.

Another indirect consequence of the “Save Our Homes” act occurs when purchasing a previously owned home. If the owners had the 3% limitation on real estate tax increases in effect for a long time, their stated real estate tax would probably not reflect the rate you might get when the house is reappraised at its sale. Just be aware of this.

Another benefit of the legislation is that your real estate tax saving is portable as long as you purchase another residence in Florida. There are formulas that explain how the tax savings is transferred to the new property. It is important to note that the savings apply regardless of whether you purchase a higher priced or lower priced property.

The 3% applies to the assessed value and not real estate taxes.
http://dor.myflorida.com/dor/property/limitations.html