If you own a property in Southwest Florida and purchased it in 2023, then it’s important that you take action between now and March 1st in order to homestead your property.
Homesteading property in Florida has several benefits.
Benefits of Homesteading
1. You get a $50,000 reduction on your tax basis
In general, the owner of real property in Florida pays taxes each year based on the value of the real property. However, if the property is Homestead property, then $50,000 of the value of the Homestead is exempt from real property taxes.
How do you qualify for a homestead exemption in Florida?
- You are the property owner.
- The property you want to claim the exemption for must be your permanent residence.
- The property you wish to claim must be the permanent residence of a dependent you claim on your taxes.
- You must have lived at the property on January 1 of the tax year in question.
- The property you want to claim the exemption for may not have been rented for more than 30 days in a given calendar year.
2. Year-over-year Tax increase capped at 3%
As the value of real property may rise annually, homeowners may also face a growing tax burden. However, if the property is Homestead property, then the amount by which the homeowner’s tax burden may increase from one year to the next is capped at 3% of the prior year’s assessment, or the percent change in the Consumer Price Index, whichever is less.
So, even if the real estate market has sky-rocketed, from one year to the next, and the value of the Homestead has increased by 20 or 30%, the owner’s tax burden will still only increase by a maximum of 3% per year, or the percent change in the Consumer Price Index, whichever is less.
3. Save our Homes benefit
Save Our Homes tax savings that may accrue over time, or a portion thereof, up to $500,000 in savings, can be transferred from one Homestead to another if the homeowner sells their Homestead and buys another Homestead.
4. Homesteaded properties cannot be taken away from you
A Homestead is exempt from the claims of creditors. If a homeowner owes money to a creditor due to personal or business loans, credit card debt, unpaid medical bills, or similar claims, and they are unable to pay. In that case, the creditor cannot collect from the homeowner’s Homestead. With very few exceptions, the Homestead is exempt from forced sale by any court and no judgment shall become a lien on Homestead property.
The main exceptions are as follows:
(a) real property taxes and other assessments levied by the government on the Homestead;
(b) consensual liens that are agreed to by the homeowner, such as a mortgage, or fees owed to a homeowners’ or condominium association; and
(c) obligations agreed to by the homeowner for the improvement or repair of the house, or house, field, or other labor performed on the property, such as construction liens.
In addition, because Federal Law trumps state law, Federal Tax Liens, and perhaps other Federal Judgments, can impose a lien on a Florida Homestead, and the Florida Homestead Exemption provides reduced protection in Federal Bankruptcy proceedings.
Watch the full video to learn more about the benefits of homesteading your property in Florida:
Homestead Issues
There are several complex difficulties that might develop with respect to homestead properties. Moreover, since the family home is often our most valuable asset, these concerns can lead to significant consequences. Some examples of such difficulties are whether you are eligible for the Homestead Exemption:
- if you live on the property for only part of the year;
- if you rent out part of the home;
- if you have multiple structures built on one property;
- if title to the property is held by a trust;
- if you own a life estate, an enhanced life estate, a remainder interest, or a one-half or other fractional interest in the property;
- if you have combined, and built your home on, multiple lots;
- if you are living temporarily away from your home;
- if you sell your home and buy another one; or
- if your home is destroyed by a fire or other casualty and is covered by insurance;
As discussed above, Florida Homestead Law provides Florida home owners with many valuable benefits and protections. If you want to learn more real estate tips, from buying and selling homes to home maintenance guides, stay updated by clicking here to see more of our blog posts.