What the tax cut will mean to you
Published: Tuesday, January 29, 2008 at 10:36 p.m.
Last Modified: Tuesday, January 29, 2008 at 10:36 p.m.
Tuesday’s approval of Amendment 1 means almost all Floridians will get some relief when they open their property tax bills in November, though state and local governments likely will chip away at some of the savings.
The measure will increase the homestead exemption, which is expected to save the average homeowner $240 in taxes. But it will likely force cities and counties to cut services — an estimated $10 million for the Alachua County Commission and $3 million for Gainesville.
The amendment will also create Save Our Homes portability, which allows residents to keep their accrued tax savings when they move within the state. Homeowners who move and get to knock down the taxable value of their new home by $100,000 because of the new portability feature would save $1,200 to $2,000 a year in the typical Florida county.
People who own homes in cities will save more from the increase in the homestead exemption than those who live outside the city limits. That’s because the increase in the exemption doesn’t apply to school taxes, which make up a higher percentage of the tax bill for homeowners who live outside of a city. Since the exemption applies to a smaller proportion of their tax bill, these less urban taxpayers will see less of a break.
The savings may be cut further since local governments can still raise taxes. Last year’s tax reform bill passed by the Legislature limits tax increases to the same percentage as the growth in Floridians' personal incomes.
The real estate sector strongly supported the amendment, hoping that portability will rejuvenate a flagging housing market. The amendment is retroactive, so people who moved to new homes last year can still ‘‘port’’ their old Save Our Homes benefit.
While the amendment may spur home sales, the flip side is that it contains relatively little for non-residents and businesses, at least in the short term. It limits the annual hike on the assessed values of their properties to 10 percent. That would have been a big deal during the first half of the decade, but is mainly meaningless in this time of de-escalating property values.
Businesses also get a $25,000 exemption on property taxes assessed on equipment, estimated to amount to $180 million statewide on November tax bills.
So, some think the continued tax shift from residents to non-residents and businesses might spur the market this year, but have a long-term dampening effect as an already unfair property tax system gets even more unfair.
The short-term boost to a flagging real estate market will be outweighed by the harm to the state’s economy caused by the unfairness of the system, according to Florida TaxWatch, an independent group funded in part by many of the state’s largest businesses.
The Save Our Homes benefit, which limits annual increases in the taxable value of a full-time resident’s home to 3 percent — shifted taxes onto businesses, renters, owners of second homes and snowbirds. Amendment 1 increases the amount of the shift, the group said.
The new $25,000 exemption is permanent, so those savings would come every year and add up over time. But they wouldn’t add up to anything near what the benefits of portability will be for some homeowners, said Susan Mosley, a Bradenton financial planner.
Homeowners who pay low taxes on homes that have had huge increases in their assessed values have felt trapped because of how much their taxes would go up in a new home. Now those people will look to move, and there will be investors ready to buy their old homes if they’re priced right.
‘‘A lot of people have already started to bottom fish,’’ Mosley said.
Mosley gives this example: Consider the person who bought a home in 1995 when the Save Our Homes exemption went into effect. Say that home is worth $750,000 now, but is assessed at only $250,000. That homeowner has been trapped, unable to move to a home of similar value, because that $500,000 benefit on his assessments translates to $6,500 to $8,000 a year in taxes depending on the local property tax rate. In a new $750,000 home, that owner would pay those added taxes each and every year. But with portability, the homeowner can transfer that $500,000 benefit to his new assessment.
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