If you're considering buying real estate in Florida, you may be wondering why so many Florida residents are making such a big deal about our real estate tax issues. If you're trying to sell real estate in Florida, you probably have a pretty good understanding of most of the problems. However, I'm going to provide some information in this post that I can almost guarantee will be news to both buyers and sellers of real estate in Florida.
Let me begin by stating that I'm a Daytona Beach native and I've been selling real estate in Central Florida for 8 years. Prior to that, I sold mobile and manufactured homes for 6 years. I now work for a brokerage where I'm selling both real estate and manufactured homes in parks. So, having come full circle, I have 14 years of experience with all the ins and outs of buying and selling all types of housing in Central Florida. But that's all just background info about me. What I'm about to share with you came from a question from someone in New Jersey who is wondering what all the fuss is about, regarding Florida's real estate taxes, since in New Jersey, their property taxes are higher than Florida's.
There is really no easy answer to this question because of the multiple layers of problems with our property taxes.
One of the problems with Florida's property taxes is that so many people have 2nd homes in Florida. And seasonal residents are unable to claim Florida's "Homestead Exemption" which is a $25,000 deduction off the assessed value of your home, before taxes are calculated (it will probably be raised to a $50,000 exemption next year, if the new property tax bill is voted in). The Florida Homestead Exemption under the Save Our Homes Act also caps your property taxes so they can't be raised by more than 3% per year.
So here's a hypothetical house and situation. Let's say you bought your permanent, Florida, primary residence (requirements for homestead) for $160,000 in 1997 and applied for the Homestead Exemption under the Save Our Homes Act as soon as your were allowed to do so. During the time that home was your primary residence, your taxes will have risen less than 3% per year. You will have also also had a $25,000 property tax deduction each year. Let's say the millage rate where you live and claim your Homestead Exemption is .023. That would make your current taxes a maximum of $4172.84 right now. (This number would actually be lower. You'll understand why as you read further down. Also, the annual property taxes on houses with the Homestead Exemption are rarely raised to the full 3%.)
Now, your Florida home at this time (December, 2007) would probably be worth approx $350,000 (it would have been worth about $400,000-$425,000 2 years ago). So let's say the guy next door to this hypothetical house, has the exact same house, and now decides he wants to sell. When the new buyer moves in, that buyer will be paying taxes on $350,000, which would equal $8,050.00. So you have 2 identical houses, worth the same amount, right next door to each other, and one has taxes that are double the amount of the other. THAT is one part of the "big deal" .
Now here's the political affront. Our assessed values used to be approximately 70-75% of the actual value of the home that was purchased; although, if you called the county tax assessor's office, they would never tell you this formula. We pay our taxes in arrears in Florida. So, as REALTORS®, we had to go through the tax records and figure out this formula on our own, just so we could help our buyers determine what their taxes would be. 2 years ago, when property values were shooting through the roof and home buyers were complaining about paying higher taxes, Volusia County (where Daytona Beach is located) dangled the proverbial carrot of lowering the millage rate in front of the residents, and the people voted to lower the millage rates, of course. BUT, at the same time, behind the scenes, the county changed the formula for calculating taxes. The assessed value is now exactly what you pay. So you will now pay taxes on 100% of whatever real estate you buy. I still have not figured out how they got away with this, with Florida's Sunshine Laws, nor can I understand why the media isn't having a field day with this information!
Then to pour salt in the wound, the county is complaining about not having enough funding for roads and other needs. So we would all like to know what happened to all the excess funds from the years when our property values tripled.
The general consensus, by outward appearances is that the county created a large number of new employee positions and funneled all that excess tax money into those positions, to keep the state from taking it as it had in the past, like when it took the lottery money that had been set aside for the schools... The only reason the lottery bill was passed in the first place is because a percentage was supposed to go to the schools of each county. But the state of Florida decided it wasn't fair to have that money sitting there for the schools, when the state couldn't balance it's own budget. So many Florida schools continue to struggle, and the finances that were supposed to help, have been stolen by the state.
There really is no easy way to summarize this post. As I stated; there are multiple layers to our property tax problems. And the deeper you dig, the more dirt you find. We're just hoping that next year brings a lot of positive changes. And I'm sure the entire country would agree with me on that one!