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One of the biggest advantages of becoming a resident of Florida is the Homestead Exemption. Not only do Florida residents get up to a $50,000 exemption in the value of their property for determining property taxes, the homestead property is also exempt from the claims of creditors. We'll explore both of these features in this article and learn how to qualify and apply for the exemption.
The Homestead Tax Exemption.
The first benefit of being a resident of Florida and owning homestead property is the homestead tax exemption. Every county in Florida levies an ad valorem property tax on all real property in the county. This tax is calculated by multiplying the taxable value of the property (as determined by the county property appraiser) by the millage rate (as determined by the local taxing authorities such as the county commission, city council, school board and special taxing districts). The homestead exemption reduces the taxable value of your homestead property by $25,000, resulting in a reduction of ad valorem taxes on your home. In January, 2008, the citizens of Florida approved Amendment 1 to its state constitution and created an additional homestead exemption of $25,000 to lower the taxable value of homestead property for all taxes except those levied by school districts. The exemption applies on the assessed value of the homestead property that exceeds $50,000. This means that, if the just valuation of your homestead property is $100,000, the first $25,000 of value and the assessed value between $50,000 and $75,000 would be exempt from taxes. However, the value between $50,000 and $75,000 would still be used to determine the amount of school tax.
Also, no matter how much your property appreciates in value, the taxable value of the property used to determine the property tax can never increase by more than 3 percent each year.
Qualifying For the Homestead Tax Exemption.
In order to qualify for the homestead tax exemption you must be an individual, who as of January 1 of the year for which you are filing, must be a permanent resident of Florida, must own and occupy the property as your permanent residence, and must hold title or beneficial interest to the property.
The first of the year date is important. If you move into the house on January 2, meet every other qualification, and spend every moment for the rest of the year in the home, you will not be entitled to the homestead tax exemption. You have to be living there on January 1.
Applying For the Homestead Tax Exemption.
If, as of January 1, you meet the qualifications listed above, you may apply for homestead exemption at the property appraiser's office in your county. The property appraiser will provide a form for you to complete. You must sign the application form in person at the appraiser's office. The application must be filed no later than March 1 of the year for which the exemption applies. All persons named on the deed of the property must sign the application, except in the case of husband and wife where only one signature is required. When applying for homestead exemption, each of you must provide proof of ownership of the property and proof of Florida residency.
1. Proof of Ownership. Any of the following items can be presented to show proof of ownership of the property: Deed to the Property (must be recorded in the public records of the county at the time of application), Property Tax Bill, Title Insurance, Contract for Deed, Cooperative Proprietary Lease, Certified Copy of Last Will and Testament (showing that the property was devised to you).
2. Proof of Residency. To show evidence of your Florida residency, you can furnish a valid Florida driver's license or Florida identification card (with the date of issuance on or before January 1) and one or more of the following items: Florida vehicle registration, Declaration of Domicile dated prior to January 1, previous year's filing of your federal income tax return showing a Florida address. If you are a resident alien, a permanent visa card or a temporary visa card with official assurance that permanent residence status is approved must be presented.
Protection From Creditors.
Perhaps the most controversial aspect of the Florida homestead law is its protection from forced sale by creditors.
Quite simply, this means that a Florida resident's homestead is exempt from creditor's claims. Therefore, if you are at fault in an automobile accident, are sued, and a judgment is entered against you, your creditors could not force you to sell your homestead to pay the judgment. Also, the judgment would not become a lien against the homestead property as it would against any other real estate you own.
There are, however, exceptions to the exemption. Liens for ad valorem property taxes and assessments are enforceable against the homestead. Any liens which you voluntarily place against your homestead, such as mortgages, are enforceable. A foreclosure of a mortgage is not a prohibited forced sale under the law. Likewise, liens for improvements made to or repairs made on your homestead are not exempted. Therefore, construction liens (discussed in Chapter 9) are enforceable against your homestead property. Other liens which are not affected by the homestead exemption are code enforcement liens and federal tax liens.
Florida is one of just a few states which allow an unlimited amount for its homestead exemption. It was established in its early years as a state to draw people as residents and to protect families from being rendered homeless in bad financial times. Lately the exemption has been heavily criticized, with the critics claiming that abuses have enabled debtors to declare bankruptcy, and use the homestead exemption to continue to enjoy a life of luxury while their creditors get little or nothing. Some examples that they cite are actor, Burt Reynolds, who declared bankruptcy in 1996, claiming more than ten million dollars in debt. Reynolds was able to keep his $2.5 million estate, named "Valhalla," while his creditors reportedly received only 20 cents on the dollar. Paul Bilzerian has been able to avoid payment of $200 million owed to his creditors while using the Florida homestead exemption to keep his $5 million dollar home. And of course, most people are aware that O.J. Simpson moved to Florida and purchased a home which was protected from the $33.5 million civil judgment against him over the slayings of his ex-wife and her friend.
Proponents of the homestead exemption point out that despite the outrageousness of some of the abuses, they are a tiny fraction of the bankruptcy filings and the homestead exemption is needed to help people who truly need the protection, such as retirees who become overwhelmed with medical bills or young families who run up too much credit card debt.
You can learn more about the Florida Homestead Exemption, as well as other advantages to becoming a Florida Resident, from Dean Hanewinckel's book, "The Official Snowbird's Guide To Becoming A Florida Resident." The book is available at Amazon.com and from its website at http://www.newfloridaresident.com/. You can also get more information about Florida residency at the website in the "Floridology" blog.
Dean Hanewinckel is an attorney in Southwest Florida who has been helping his clients become Florida residents since 1984. His law practice includes estate planning, probate, real estate and corporate and business law.
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