As Benjamin Franklin once famously asserted, “…in this world, nothing is certain except death and taxes.” If you’re anything like us, then just thinking about taxes is enough to make your blood pressure spike. Fortunately, there are programs available to reduce that pesky tax burden and give us some peace of mind. Unfortunately, those programs are often difficult to understand, and most people don’t know how to qualify for them. Take Florida’s homestead tax exemption, for example. Let’s talk about it.
What is the Florida Homestead Exemption?
Simply put, the Florida Homestead Exemption is a program that allows you to decrease the amount you’re expected to pay on your property taxes. This exemption is based on the value of your home, with a limit of $50,000. Of course, that doesn’t mean you get $50,000 reduced from the property taxes you owe (though, wouldn’t that be wonderful?). The homestead exemption simply means that up to $50,000 of your home’s value may be exempt from taxes.
How Does it Work? (The Math Section)
Property taxes in Florida are on average .98%, which is a tenth of a percent lower than the average across the country (1.08%). If you own a $100,000 home, that means you’ll pay roughly $980 a year in property taxes. If you qualified for the homestead exemption, you would only have to pay property taxes on $50,000 of that value, virtually cutting your payment in half, making your total taxes due about $490.
Of course, you can’t just reduce your property value by $50,000 and call it good. The exemptions are easiest to understand when you break property value into chunks of $25,000. For instance, if your home is worth $100,000, the first $25,000 is fully exempt from property taxes, the second $25,000 is taxable, the third $25,000 is exempt (excluding school district taxes), and the fourth $25,000 is taxable. Check out the diagram below.
The tax exemption works the same way, no matter what your home is worth. If your home is valued at $200,000, you are still only tax-exempt for the first and third chunk of $25,000 because the limit is $50,000. If your home is instead valued at $65,000, you are exempt for the first set of $25,000 and a portion of the third set ($50,000-$65,000), which in this case would equal $15,000 ($40,000 total).
How to Qualify for the Homestead Exemption
The word ‘homestead’ means a home that’s currently occupied by a family. So, as you’d expect, the qualifications for homestead exemption approval revolve around that definition. Here are the criteria you need to meet to qualify:
- You must own the property.
- The home in question is your permanent residence or the permanent residence of one of your dependents.
- It must have been your permanent residence on January 1st of the tax year in question. For instance, if you wanted to apply for the homestead exemption on your 2020 taxes, you must have lived in the house on January 1st, 2020.
- The property must not have been rented out for more than 30 days of the current calendar year.
How to File for Homestead Exemption
The application process is actually much more straightforward than you’d think. All you have to do is complete the application form DR-501 (either online or in-person) and provide proof that the property is your Florida residence. You can verify this by providing items like a driver’s license, a state ID, a vehicle registration number, or a voter ID.
If you’re interested in assessing the value of your property and learning more about the homestead exemption in Florida, reach out to the Welch Team today! We’re happy to help.