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What Is the Homestead Exemption on the Sale of a House in Florida?

May 09, 2023

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Real estate laws change across different states and counties, but they're always meant to protect a homeowner's rights, sometimes directly limiting the expenses generated by property taxes and other municipal fees.

Homeowners Saving TaxesIf you plan on buying a new house in Florida, you can't rule out the advantages of filing a homestead exemption beforehand. The Florida homestead exemption can be a homeowner's saving grace to avoid paying taxes beyond the property's market value.

What Is the Homestead Exemption

As allowed by the Florida Constitution, Florida homeowners can qualify for a homestead exemption of up to $50,000, reducing the annual increase in property tax assessment. If the property is a person's permanent residence, the initial $25,000 is exempt from the assessed property value.

The homestead exception can be found under Section 196.031 of the Florida Statutes. It serves to protect homeowners and their investments from creditors after a real estate purchase, applying a property tax break that's viable for all taxes including property and school district taxes.

This protection is meant for people's permanent place of residence, so it can also be implemented in condominiums, long-term leases, and even mobile homes and stationary houseboats. All that matters is that the homeowner proves their intent to reside inside the property permanently.

Who Qualifies as a Homestead Under Florida Law?

By going over the definition of a homestead, in the context of what counts as a homestead under Florida law, we can also understand the qualifications that make a person eligible for the homestead exemption.

A homestead simply refers to a person's place of residence within the state, and this extends to the owner's family or any other person living legally and permanently inside the property. As long as the space is used as a permanent place of residence, there are no limitations regarding its dimensions, square footage, or market value.

So, what are the requirements to be eligible for the Florida homestead exemption?

  • The applicant must prove their intent to turn the property into their permanent residence, usually via a Declaration of Domicile with the clerk of the court.

  • The homeowner must be a Florida resident. To prove this, they need to present their personal documentation to qualify for the exemption, namely their driver's license, car registration, voter's ID, and a copy of the tax bill within the state. Homeowners who have recently relocated from a different state might be asked to prove that they've given up on their former place of residence.

  • The owners must have the property's legal title. The title must show that the property is owned by a natural person. This means that the property won't be eligible for the homestead exemption if it's owned by a corporation, an LLC, or any other legal/commercial entity.

  • We already mentioned that this law applies to the property's permanent residents. More specifically, the owner must reside in the property as of January 1 of the tax year in which they're applying for the exemption.

    While you can still spend any amount of time elsewhere (vacations, family visits, etc), you can't change your home address or place of residence. In addition, the property can't be rented for more than 30 days over the course of that same tax year.

Benefits of Securing the Homestead Exemption

One of the first lessons to learn as you prepare to buy a new home: a change in ownership can also increase property taxes. After a real estate sale, the property's asset value could be reworked into its full market value. Homeownership costs in Florida are famously high, and property taxes have a lot to do with that.

An Assesed Value Between 50,000 and 75,000 Gets an Aditional ReductionUpon being approved for the homestead exemption, homeowners get a reduction of $25,000 in the assessed value of the property. An assessed value between $50,000 and $75,000 can get an additional $25,000 reduction. Unlike the initial exemption, this reduction would not include school district taxes.

This is a great starting point that could lead to years' worth of savings. Each year, an exemption is applied to the home's assessed value, directly affecting taxable value and, in turn, the tax rate that homeowners need to pay.

The property's market value is bound to increase over time but, under the homestead exemption, property appraisers can only increase the assessed value of the home by the lesser of 3% or the percent change in the Consumer Price Index (CPI). Moreover, this protection prevents creditors from forcing the sale of a homestead to cover unpaid debts or municipal fees.

There are still exceptions that could override Florida's homestead exemption, so it's important to get the assistance of a real estate specialist to address these issues in advance. A title and escrow service can go over any pending claims, liens, unpaid taxes, and other irregularities in your title before you file your homestead application. The company can also help you gather all the required items and verify all your documentation in advance.

By then, you can rest assured knowing that you'll get the financial protection you need for your new home after getting approval for the homestead exemption.

Get the best real estate services to save thousands of dollars each year. Key Title & Escrow helps you cover all your bases so you don't find yourself in a sticky situation once the tax season rolls around. Our specialists can help you file your homestead exemption and take over any other preparations to ensure a smooth closing. To get more information, feel free to call (305) 235-4571 or toll-free at (800) 547-0006. You can also fill out the contact form on this page and we'll get back to you with all the answers you need to start your real estate transaction on a high note.
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