One important factor in home affordability is your Florida property taxes, and we have been dealing with rising property taxes for quite some time. But in 2008, property tax reform completely changed "the rules," thus bringing a whole lot of confusion to something that should be relatively simple to understand.
I received a question from a long-time reader and past client regarding property taxes. James wrote:
I lived in Tallahassee for 8 years and was fortunate to use your company to sell my home in May of this year. Bill Peck was my Realtor. I now live in Miami, and I have a question about property taxes.
What makes up the property taxes and why is there a big disparity in the taxes from state to state and different counties within a state? For instance, my yearly property tax was about $2,000 per year; however, I noticed that some homes in the Miami area have a property tax of $6,000 or higher. I cannot imagine having to pay that much in property tax. Please advise.James
I think James has offered up two key questions that Floridians should know and understand. First of all, how do different taxing authorities assess taxes and secondly, why are properties in an area taxed at different levels?
Calculating Your Florida Property Tax
The key to understanding how different taxing authorities (either cities or counties in Florida) calculate your property tax, you have to understand the two factors used in taxation. The first is the assessed value of your home, and the second is the total millage rate for your local city or county. The millage rate is a published amount per $1,000 that is used to calculate taxes on property. The formula for calculating your annual tax bill is millage rate multiplied by taxable value.
The second question has a far less logical answer. In 1992, the State of Florida passed the "Save Our Homes" amendment to the Florida constitution which limited the amount of value a homestead property could increase on the tax rolls each year. The 3% cap on increased values has created chaos in the streets... so to speak.
The 3% cap is the reason that homes side-by-side and having nearly identical values in the real estate market can be assessed completely differently. Somebody who has lived in their home a long time only has it assessed at a 3% annual growth (at the most), while somebody who purchased at the height of the market is assessed based upon that value. Additionally, homeowners have the right to take their value savings with them (referred to as portability), thus long-time Florida home owners are taxed at a lower rate than newly arrived Floridians.
I'm sure that looked really smart on paper when they concocted the idea, but unfortunately it means that people moving to Florida see themselves paying more in taxes than those of us already here, thereby acting as a disincentive for Florida growth.
Reducing Your Florida Property Taxes
Anybody who watches the news or follows the housing market in Florida knows that property values have fallen, yet many people have not tried to lower the assessed value of their home. If you find yourself in this group, then you might be interested in a blog I wrote entitled How To Lower Your Property Taxes. It includes a video produced by the Leon County Tax Appraiser's office and it could help you save a lot of money.
So, to our reader James, different counties have millage rates designed to collect enough taxes to cover the local costs, therefore each area is different. Your Florida property taxes are lower than your neighbor's because of portability (your brought your lower tax assessment from Tallahassee to Miami using portability) and your home's taxable value is lowered by the fact that you purchased your Tallahassee home nearly 10 years ago.
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.