Property Tax Increase Limits on Non-Homestead Florida Property: Navigating New Legislation

Property taxes in Florida are subject to several regulations aimed at preventing unexpected increases, especially for non-homestead properties. These properties, which are not the primary residences of their owners and hence do not qualify for the homestead exemption, are still protected under Florida law. The state has instituted a cap known as the Non-Homestead 10% Cap, which is stipulated in sections 193.1554 and 193.1555 of the Florida Statutes. This cap limits any increase in assessed value of non-homestead properties to a maximum of 10% each year, excluding the value calculated for school board taxes.

This assessment limitation is in place to provide a measure of predictability and stability in property taxation for those owning investment, rental, or second properties in Florida. It complements the Save Our Homes (SOH) amendment, which serves a similar purpose for homestead properties by capping increases in their assessed value at 3% or at the rate of change in the Consumer Price Index (CPI), whichever is lower. The SOH cap, however, is not applicable to non-homestead properties, which underscores the different treatment these property categories receive under the Florida Constitution.

While the 10% cap for non-homestead properties restrains the growth of the assessed property value, it’s important to note that this doesn’t necessarily restrict the total tax rate or non-ad valorem assessments, which can vary based on local government decisions. Property owners in Florida must understand the scope and limitations of these assessments to effectively manage their property tax liabilities.

Please note that the content provided  is for informational purposes only and is not intended to serve as tax or legal advice. The information contained herein is not a substitute for professional legal or tax consultation and should not be relied upon for any legal or tax matters. If you require legal or tax assistance, please consult with a qualified attorney or tax professional who can provide guidance tailored to your specific situation.

Understanding Property Tax Basics in Florida

Property taxes in Florida are a key revenue source for local governments and are based on the assessed value of real property. The process involves periodic assessments by a property appraiser to determine market and assessed values, directly impacting a property owner’s tax responsibilities.

Assessment of Real Property

In Florida, all real property, which refers to land and improvements attached directly to the land such as buildings, is subject to property tax unless expressly exempted. The Florida Department of Revenue oversees the general administration of property taxation in the state, ensuring consistent application across various locales.

The Role of the Property Appraiser

Each county in Florida has a property appraiser who is responsible for identifying, locating, and fairly valuing all property, both personal and real, within the county for tax purposes. The property appraiser’s valuation is subject to oversight from the Department of Revenue to promote uniformity and equality across the state.

Determining Market and Assessed Value

Market Value: The property appraiser determines the market value of a property as of January 1 of each year. Market value, sometimes referred to as just value, is the most probable price that a property would bring in a competitive and open market.

Assessed Value: This is initially based on the market value but may be adjusted for certain exemptions, differential limits, or caps. Florida law stipulates that the assessed value of non-homestead real property cannot increase by more than 10% each year. This limitation applies to non-school board taxes and continues until there is a change of ownership or substantial changes to the property. After exemptions are subtracted from the assessed value, the result is the taxable value upon which property taxes are levied.

Homestead and Non-Homestead Tax Regulations

In Florida, property tax regulations distinguish between homestead and non-homestead properties, each with its own set of rules and limitations affecting tax assessments and caps.

Tax Exemptions and Benefits for Homeowners

The homestead exemption in Florida is a legal provision designed to provide a significant property tax break for residents who consider their Florida property as their primary residence. Homeowners are eligible to receive an exemption of up to $50,000 on their property’s assessed value for the purposes of property taxes. This exemption applies only to the first $25,000 for all taxes and an additional $25,000 for non-school taxes.

Save Our Homes Cap and Assessment Limits

The Save Our Homes (SOH) amendment provides further relief for homestead properties by implementing an assessment increase limit, commonly known as the SOH Cap. This cap restricts any increase in assessed value of homestead properties for tax purposes to a maximum of 3% each year, protecting homeowners from rapid increases in their property tax bills. Pending legislation proposes to reduce this cap to 2%, subject to approval by the legislature and voters.

Implications for Non-Homestead Properties

For non-homestead properties—those not serving as the owner’s primary residence—the situation is different. These include second homes, rental properties, commercial properties, and vacant land. There is a 10% cap on annual increases in assessed value for non-homestead properties; however, this limit does not include school board taxes. While offering some protection against steep increases, non-homestead properties do not benefit from the same tax shields as homesteaded properties and can experience more significant jumps in property tax assessments.

Impact of Ownership Changes on Property Tax

When ownership of non-homestead property in Florida changes, it can significantly affect the assessed value for property tax purposes. This is due to the legal provisions that cap the annual increase of assessed value.

Change in Ownership or Control

Any transfer of property, whether complete or partial, is seen as a change in ownership. Florida Statute §193.1554 indicates that for non-homestead residential properties, the assessed value cannot increase by more than 10% annually until a change of ownership or control occurs. A change in ownership is often documented through the issuance of a new deed. When such a change happens, the property is reassessed at its current market value, and the 10% cap is reset.

  • Change involving more than 50%: A significant factor is whether there is an ownership change of more than 50%; it typically triggers reassessment.
  • Effect of control change: Similarly, changes in control, even without a deed transfer, also necessitate reassessment.

Effects on Property Tax Following a Divorce

Divorce may result in the division of assets, including real estate. If the divorce decree or settlement leads to a change in the ownership or control of a non-homestead property:

  • Deed transfer: The transfer of interest from one spouse to another, and reissuance of the deed, constitutes a change in ownership.
  • Property tax reassessment: This change in ownership may lead to a reassessment at the current market value and elimination of the previous 10% cap on assessment increases.

Commercial Property and Publicly Traded Companies

For commercial properties, the same rules apply regarding the 10% cap on assessment increases, as outlined in Florida Statutes 193.1554 and 193.1555. However:

  • Publicly traded companies: A change in ownership, reflected by a shift in the ownership of more than 50% of the company’s shares, may necessitate a property tax reassessment.
  • Ownership changes: If a publicly traded company or commercial entity undergoes changes in control, even without a formal ownership transfer, it may alter the property’s assessed value for tax purposes.

Caps and Increases: Comprehending the Limits

Florida’s property tax structure applies specific limitations on the amount property taxes can increase annually, especially pertinent to non-homestead properties. These caps are influenced by several factors, including the Consumer Price Index (CPI) and local school district tax policies.

Non-Homestead Assessment Limitation

Non-homestead properties in Florida are subject to an assessment limitation which caps the annual increase in assessed value at 10%. This limitation is designed to protect property owners from significant spikes in property tax bills due to rapidly increasing property values. It applies to all non-homestead real property, meaning properties that do not qualify for the homestead exemption, including rental properties, second homes, and commercial properties. However, the cap does not extend to tangible personal property.

Consumer Price Index and Rate of Inflation

The annual change in the Consumer Price Index (CPI) influences the rate at which tax caps and assessments may increase. The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Tax authorities may use this rate of inflation as a guide when setting tax rates or adjusting caps, aiming to ensure they remain in line with the overall economic climate.

School District Taxes and Local Implications

While non-homestead properties benefit from the overall 10% cap on assessment increases, the cap does not apply to the portion of assessments used to calculate school district taxes. School boards and local governments may have different limitations or may be able to exceed the standard assessment cap for non-homestead properties under certain conditions. This allows school districts to respond to the changing needs of the community and ensure adequate funding, which may lead to variability in tax implications at the local level.

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