On January 29, voters in Florida will head to the polls to vote in the presidential primaries. Also on the ballot for consideration is Amendment 1, a very important property tax referendum. Amendment 1 is an attempt by our state government to address rising property taxes, and is being touted as a plan that will save taxpayers nearly $10 billion dollars over 5 years. My local association is encouraging all Realtors to vote yes on Amendment 1. Supposedly, this amendment will help revive our somewhat stagnant market. And I'm all for that! However, I am also a homeowner and I decided that I needed to research all aspects of this amendment before deciding whether I would vote "yes" or "no".
Not only is Amendment 1 trying to address our rising property taxes, it is also an attempt to rectify problems that have arisen from the last property tax reform passed in 1995. The 1995 reform known as "Save Our Homes", placed a 3% cap on the property tax assessments of homesteaded (or primary residence) 
property. No cap was placed on non-homesteaded property such as second homes, rental property, or businesses. It sounded good on paper, but it left new homeowners and non-homesteaded properties paying a disproportionate amount of taxes. Then when property taxes more than doubled in the last six years, local governments found themselves with a windfall and they used it to expand their budgets and reserves, and didn't give any back to Florida families or businesses.
Long term homeowners quickly realized that they were trapped in their homes. As property values rose, and millage rates continued to increase, they couldn't sell their property AND retain the tax break they had realized with the 3% cap. New homeowners were bitter because they were paying taxes on just market assessments, while some neighbors were enjoying a capped property tax assessment. For example, we purchased our home in 2000 for $132,000. The just market value of our home is now $227,000. But with the 3% cap per year on our property, plus the $25,000 homestead exemption, we only pay taxes on an appraised value of $98,000. Our taxes are approximately $1005/year. If someone purchases the home next door to me for $225,000, they won't have the 3% tax cap protection that I have and their taxes would be approximately $2,500.
Needless to say, it is not in the best interest of a long term homeowner to sell their house. And I didn't even cover the rising taxes paid by out of state owners, investors, and businesses. There is no cap on their assessments, so you can imagine the financial strain they are undergoing as their taxes sometimes rise 50% per year.
Amendment 1 addresses some of these issues, but not all. Not only does it offer a 10% cap on the assessment of property for non-primary residences and businesses, it offers "Save Our Homes" portability. If this referendum passes, then homeowners currently enjoying the tax break from the 3% cap on their assessed value will be able to carry it over to a new purchase. In essence, I would be able to take the difference between my $98,000 assessed value and my $227,000 just market value (called cap differential) and apply it toward the assessment of my new home. Plus, they are doubling the $25,000 homestead exemption. So I could upgrade to a $300,000 home, deduct my $50,000 homestead exemption, plus the $129,000 cap differential and pay taxes on $121,000! If a homeowner wants to downsize, then they can carry up to 50% of their cap to the new property. Unfortunately, the only tax break that new homeowners with no previous cap differential will have- is the doubled homestead exemption.
As a Realtor I can see how it could stimulate our market by increasing sales. And as a long term homeowner, I certainly appreciate the opportunity to pay lower taxes on a larger home. I also think it is high time that a cap was placed on non-homesteaded properties and businesses. And it seems that Amendment 1 addresses all of these issues. However, Amendment 1 doesn't address the high property taxes paid by homeowners who do not have the "Save Our Homes" portability. Even though they will be able to use the $50,000 homestead exemption, that is too little. I think they should be given some type of first time home buyer tax break.
Amendment 1 is not perfect, but at least it is something. We need tax reform in Florida, so I am leaning toward a yes vote. But, I have one very important concern for which I haven't been able to find an answer. What happens to the 3% cap when you take your portability over to your new home? Do we lose it? THAT would be disastrous. I have e-mailed Governor Crist to ask him if the 3% cap will carry over to new home purchases, and await his answer.
Sources:
http://www.okaloosapa.com/index-sohp.html
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