Homestead exemption in Florida


Homestead exemption in Florida

Homestead is given meaning in three different contexts under Florida law: 1. exemption from forced sale before and at death per Art. X, Section 4(a)-(b) of the Florida Constitution [http://www.flsenate.gov/Statutes/index.cfm?Mode=Constitution&Submenu=3&Tab=Statutes#A10S04] , 2. restrictions on devise and alienation, Art. X, Section 4(c) of the Florida Constitution and 3. exemption from taxation per Art. VII, Section 6 of the Florida Constitution. Florida's homestead exemption providing an exemption from forced sale before and at death are among the most protective in the United States as it provides "no limit" to the value of certain real property that can be protected from creditors. The property tax exemption clause of Article VI renders property tax-free to the extent of certain dollar amounts in the value of the homestead.

It should be noted that the definition of a homestead is not necessarily co-extensive for Article X, Section 4 (a)-(c)exemption purposes (exemption from creditors and restrictions on descent and distribution) and Article VI purposes (exemption from taxation). Both provisions apply automatically upon the establishment of a primary residence in Florida, but to reap the tax assessment benefits, the homestead exemption must be claimed by a filing with the state. Homestead can be lost if the homeowner abandons use of the real property as a homestead.

cope of the Creditor Protection

Florida's creditor protection homestead provision is one of the broadest in the United States. The value of the property that can be protected is unlimited, so long as the property occupies no more than ½ acre (2,000 m²) within a municipality, or 160 acres (650,000 m²) outside of a municipality. The provision is written into the Florida Constitution, Article X, section 4, so it can not be removed without a constitutional amendment.

Because of the scope of the protection afforded, persons from other states with heavy debts or large court judgments against them have been known to purchase expensive estates in Florida, a famous example being O.J. Simpson. This strategy has been somewhat impaired by the 2005 Bankruptcy Code amendments.

One event that can drastically affect the value of a homestead is municipal incorporation. If a 160 acre (650,000 m²) non-municipal homestead is on land that is later incorporated into a municipality, the homestead will be grandfathered in and remain protected for the owner and his heirs. However, for any future purchasers of all or part of the property, the protected land will drop to the ½ acre (2,000 m²) allowed within a municipality.

Protection from Creditors

The homestead exemption offers virtually absolute protection from forced sale to meet the demands of creditors, except under three special circumstances listed below.

One unique feature of Florida's homestead exemption is that it attaches to proceeds from the sale of a home, if the homeowner intends to use those proceeds to establish a new Florida homestead within a reasonable time. Therefore, if the owner of a $1,000,000 home sells that home and puts the money in a bank account, that money is still protected by the homestead exemption, so long as the homeowner has a bona fide intent to use it to purchase another home in Florida entitled to the exemption within a reasonable period of time. This protection is lost if the funds are commingled with other funds not designated for such a purchase. Also, the protection only extends to the amount the owner intends to invest in a new homestead - if the owner of a $1,000,000 home sells that home, and makes clear his intent to purchase a $750,000 home, the remaining $250,000 will lose its protection.

Exceptions for Certain Creditors

Three types of creditors can still force the sale of a homestead to collect debts owed to them. These are:
#The State of Florida and its counties or municipalities, to collect past due property taxes;
#Parties to whom the property was specifically pledged as credit for a mortgage;
#Mechanics who are owed money for work performed in repairing or improving the property.

Because the homestead exemption is state law, it can also be overridden by the federal law due to the Supremacy Clause of the United States Constitution. Federal income tax liens are superior to the homestead protection provided by the Florida Constitution. The Internal Revenue Service's policy is reluctant to foreclose on taxpayer's homes to enforce these liens, often only getting satisfied if the real property is sold or mortgaged before the tax lien expires.

Reduction of Ad Valorem Property Tax

The Great Depression began in 1929. As the Depression deepened, many Florida property owners found themselves unable to pay their property taxes and in serious danger of losing their homes. In response to this serious problem, State Representative Dwight Rogers of Fort Lauderdale in 1933 proposed and successfully passed legislation to place the $5,000 Homestead Exemption Amendment on the state ballot. Florida's voters overwhelmingly approved the Homestead Exemption Amendment in 1934 (Article X, Section 7, as it was numbered before the 1968 Florida Constitutional re-write). The initial Homestead Exemption sought to ease the burden on homeowners by exempting property taxes on the first $5,000 of a homeowner's residence. The exemption was increased by the Florida Legislature by statute to $10,000 during the 1960s, although this was not incorporated into the constitution. By Constitutional amendment adopted by a landslide in 1980, the exemption was increased to $25,000. On Jan. 29, 2008, voters approved an amendment to the Florida Constitution raising this exemption to $50,000.

Florida property tax homestead exemption reduces the value of a home for assessment of property taxes by $25,000, so a home that was actually worth $100,000 would be taxed as though it was worth only $75,000. Florida counties are permitted to tax property for up to 3% of its total value, so a $100,000 home could be taxed $3,000/yr, but the homestead exemption would reduce that burden to $2,250/yr.

Additionally, the Florida homestead exemption caps the rate at which property taxes may be increased. Though millage rates may be changed, the assessed value a house with a homestead exemption can be increased by is fixed. This is the result of the “Save Our Homes” Amendment to the Florida Constitution which was passed by voters in 1992, and went into effect in 1995. The amendment caps the increase of the assessed value of a home with a homestead exemption to the lesser of 3% or the rate of inflation. This means that if an owner had a homestead exemption on a home valued at $100,000 in 1995, and the exemption was still valid in 2005, the most the home could be assessed at is approximately $126,000 [http://dor.myflorida.com/dor/property/limitations.html] . For comparison, records of the Florida Association of Realtors show the median price of a single family home during the same time increasing 175% from $89,900 in 1995, to $247,000 in 2005 citequote.

Homestead exemptions are only available on an individual’s primary home. Therefore, this exemption does not apply to businesses, rental property, second homes, or homes with owners that do not claim Florida as their primary residence. Further, the benefits from the “Save Our Homes” amendment do not run with the homesteader or the house. A homesteader that moves will pay taxes on the full market value of the new house for their first year. Acquiring a house that had a homestead exemption does not entitle the buyer to retain its low tax rate, as homestead exemptions cannot be inherited or purchased, nor are they transferable.

Supporters of the “Save Our Homes” Amendment contend that it allows long term residents with a fixed income to be able to afford to stay in their homes without being driven out by tax increases as their property value increases. Detractors argue that it creates an unfair system of taxation in which first time home buyers, new residents, seasonal residents, and businesses are burdened with more than their share of taxes while homesteaders are trapped in their own homes, often unable to move without doubling their tax rate.

Under Florida law, the homestead exemption is only available to US citizens, permanent resident aliens, or others who are legally able to form the intent to remain permanently under immigration laws.

For the taxation homestead exemption, "Persons Residing Under Color of Law" (PRUCOL -- a term created by the courts -- which applies to persons in the US with asylum or parole status, or someone who has applied for and completed the I-485 application process for a green card but is still awaiting final approval/issuance of the card). A person in the US under an E-, H-, L- or R-class visa is not eligible for homestead, pursuant to Rule 12D-7.007(3), Florida Administrative Code. A person under an H- or L- visa who has an already approved I-140, and is awaiting USCIS retrogressions in order to submit the I-485 application, is not benefited with the homestead exemption. There is a loophole in the system. J-4 visa holders, who are spouses of J-1 visa holders, are assigned an Alien Number. Some counties accept alien numbers as part of the requirements to obtain a homestead exemption, although J- visa holders cannot file for adjustment of status.

Protection to surviving spouse or minor child

The provision also protects a spouse in several ways. First, it restrains the homeowner from conveying the property without the approval of their spouse, even if the property is entirely in the name of one spouse, or was purchased entirely from funds of one spouse. The provision also prohibits a spouse from devising the property by will, if the homeowner is survived by a spouse or a minor child. A spouse may waive these rights in writing with respect to the will, but a minor child is not competent to do so. Finally, the homestead exemption for property taxes automatically attaches to the surviving spouse, so the property will never be exposed to the creditors of either spouse because of the death of the other.

Obtaining a Homestead Exemption for Property Taxes

The elected Property Appraisers of Florida's 67 counties are the state constitutional officers responsible for maintaining the integrity of the homestead tax exemption program. Nobody in Florida "automatically" obtains a homestead exemption. Instead, a homeowner on title (or the beneficiary of a trust, a person legally or naturally dependent upon the owner or lessees having an original term of 98 years or more, all having to meet "equitable title to real estate" law) must file for a homestead exemption with the Property Appraiser in the county in which the property is located. While most counties still use paper applications, a few larger counties have offered online homestead filing starting around 2002.

References

cite news
first = Aaron
last = DeSlatte
title=Special session ends with large tax cut
url=http://www.floridatoday.com/apps/pbcs.dll/article?AID=/20070614/BREAKINGNEWS/70614012/-1/taxdivide
format =
work =
publisher = Florida Today
date = 2007-06-14
accessdate = 2007-07-04
language = English

cite news
first = Aaron
last = DeSlatte
title=Special session ends with large tax cut
url=http://www.floridatoday.com/apps/pbcs.dll/article?AID=/20070614/BREAKINGNEWS/70614012/-1/taxdivide
publisher = Florida Today
date = 2007-06-14
accessdate = 2007-07-04
language = English

cite news
first = Follick, Joe | last = Dunkelberger, Lloyd.
title = State leaders reveal tax-cut details
url = http://www.heraldtribune.com/article/20070609/NEWS/706090691/-1/141773
publisher = Herald-Tribune
date = 2007-06-09
accessdate = 2007-07-04
language = English

cite news
first = Follick, Joe | last = Dunkelberger, Lloyd.
title = State leaders reveal tax-cut details
url = http://www.heraldtribune.com/article/20070609/NEWS/706090691/-1/141773
publisher = Herald-Tribune
date = 2007-06-09
accessdate = 2007-07-04
language = English

cite news
first = Michael
last = Mayo
title = Legislators shouldn't look for kudos for property tax plan
url = http://www.sun-sentinel.com/news/columnists/sfl-mayocol17jun17,0,1511101.column
publisher = South Florida Sun-Sentinel
date = 2007-06-17
accessdate = 2007-07-04
language = English

cite news
first = Aaron
last = DeSlatte
title=Special session ends with large tax cut
url=http://www.floridatoday.com/apps/pbcs.dll/article?AID=/20070614/BREAKINGNEWS/70614012/-1/taxdivide
publisher = Florida Today
date = 2007-06-14
accessdate = 2007-07-04
language = English

cite news
first = Doug
last = Sword
title = Crist's tax ideas causing concern
url = http://www.heraldtribune.com/article/20070207/NEWS/702070666/-1/141773
publisher = Herald-Tribune
date = 2007-02-07
accessdate = 2007-07-04
language = English

cite news
title=Common property-tax cut questions
url=http://www.miamiherald.com/458/story/141750.html
publisher = Miami Herald
date = 2007-06-16
accessdate = 2007-07-04
language = English

cite news
title = Still No Relief From Property Tax Deal
url = http://www.tbo.com/news/opinion/lettertotheeditor/MGB36T5693F.html
publisher = Tampa Tribune
date = 2007-06-23
accessdate = 2007-07-04
language = English

cite news
first = Paul B
last = Brown
title = Property Tax - Dream Home Diaries - Great Homes - New York Times Blog
url = http://dreamhome.blogs.nytimes.com/tag/property-tax/
publisher = New York Times
date = 2007-06-18
accessdate = 2007-07-04
language = English

cite news
title = Special report: Save Our Homes
url = http://www.orlandosentinel.com/news/specials/orl-special-saveourhomes-sg,0,7191127.storygallery
publisher = Orlando Sentinel
accessdate = 2007-07-04
language = English

cite news
first = Sword, Doug | last = Pollick, Michael. Braga, Michael.
title = Non-homesteaders bear the brunt of tax reform
url = http://www.heraldtribune.com/article/20070615/BUSINESS/706150321/-1/141773
publisher = Herald-Tribune
date = 2007-06-15
accessdate = 2007-07-04
language = English

cite news
first = Aaron
last = Sharockman
title = Portable 'Save Our Homes' in the works
url = http://www.sptimes.com/2006/09/20/Tampabay/Portable__Save_Our_Ho.shtml
publisher = The St. Petersburg Times
date = 2006-09-20
accessdate = 2007-07-04
language = English

cite news
first = Bill
last = Kaczor
title = State panel to discuss Plan B if voters nix tax cut
url = http://www.tcpalm.com/tcp/florida_news/article/0,2820,TCP_24432_5603719,00.html
publisher = TC Palm Florida News
date = 2007-06-26
accessdate = 2007-07-04
language = English

External links

Official
* [http://dor.myflorida.com/dor/property/ Florida Department of Revenue (DOR): Property Tax Administration]
* [http://www.bcpa.net/ Broward County Property Appraiser Lori Parrish]
* [http://dor.myflorida.com/dor/property/appraisers.html DOR: Contact List for Property Appraisers in Florida]
* [http://www.flsenate.gov/Statutes/index.cfm?Mode=Constitution&Submenu=3&Tab=Statutes Florida Constitution Online]

Other

* [http://www.floridatoday.com/apps/pbcs.dll/article?AID=/20070614/BREAKINGNEWS/70614012/-1/taxdivide: Special session ends with large tax cut]
* [http://www.heraldtribune.com/article/20070609/NEWS/706090691/-1/141773: State leaders reveal tax-cut details]
* [http://www.miamiherald.com/458/story/141750.html: Common property-tax cut questions - MiamiHerald.com]
* [http://www.sun-sentinel.com/news/columnists/sfl-mayocol17jun17,0,1511101.column: Legislators shouldn't look for kudos for property tax plan]
* [http://www.tbo.com/news/opinion/lettertotheeditor/MGB36T5693F.html: Still No Relief From Property Tax Deal]
* [http://dreamhome.blogs.nytimes.com/tag/property-tax/: Property Tax - Dream Home Diaries - Great Homes - New York Times Blog]
* [http://www.heraldtribune.com/article/20070615/BUSINESS/706150321/-1/141773: Non-homesteaders bear the brunt of tax reform]
* [http://www.orlandosentinel.com/news/specials/orl-special-saveourhomes-sg,0,7191127.storygallery: Special report: Save Our Homes - Orlando Sentinel]
* [http://www.sptimes.com/2006/09/20/Tampabay/Portable__Save_Our_Ho.shtml: Portable 'Save Our Homes' in the works]
* [http://www.tcpalm.com/tcp/florida_news/article/0,2820,TCP_24432_5603719,00.html: State panel to discuss Plan B if voters nix tax cut]


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