Now is the time to BUY! Waiting will cost you MONEY!

Now is the time to BUY! Waiting will cost you MONEY!

 

by Toni Hedstrom – P.A., Realtor, ePro, Owner

 

What is Homestead?

Florida is one of only a few states that offer unlimited homestead exemption for its homeowners. This benefit which stems from the Florida ‘Save Our Homes’ act allows for a significant reduction to a home’s taxable value if it is the owners ‘Primary Residence’.

Homestead Exemption is applied to a home’s taxable value (which is different from the market value). In Florida, the exemption is $50,000 with the first $25,000 applied to all property tax, including school taxes. The remaining $25,000 is applied to the tax value of a home between $50,000 – $75,000 **In other words, if your home is valued at $49,000 – you would not get the additional $25,000 exemption.

How is my Property Tax Established?

When you purchase a home, it is re-assessed by the County Property Appraiser. The Property Appraiser’s intent is to establish an ‘updated’ property tax value of your home. This means, the taxable value can (and likely will) differ from the prior owner. When you purchase a home, it is best to ignore what the prior owner was paying and attempt to establish a more accurate estimate of what you will be paying. This is done by determining the market value of the home which will allow you to estimate the likely assessed value of the home and then, apply the property tax formula.

(Assessed Value / 1000) * Mill Rate = Projected Tax to be Paid

Mill Rates vary by county and district. Here is an example of a home located in the Grand Hampton community of New Tampa (Hillsborough County):

 

Market Value: $399,000

Minus Exemption: $50,000

Assessed Value: $352,070

Divided by 1000= 352.07

Multiplied by the mill rate of 20.5552= $7235.74 **this is the property tax due annually on this home**

 

You will note that the Market Value minus the Exemption does not equal the Assessed Value and this is because in most all cases, the Assessed Value is less than the Market Value even before the exemptions are applied.

If you do not qualify for Homestead Exemption you can see the impact to your tax bill here:

 

With Homestead Exemption

Market Value: $399,000

Minus Exemption: $50,000

Assessed Value: $352,070

Divided by 1000= 352.07

Multiplied by the mill rate of 20.5552= $7235.74

Without Homestead Exemption

Market Value: $399,000

Assessed Value: $375,000

Divided by 1000 = 375

Multiplied by the mill rate of 20.5552 = $7707.00

You can see from this example that the Homestead Exemption is saving this homeowner approximately $472 per year! That would be equal to a $39.00 monthly impact to your house payment!

And, there are further benefits to having homestead that include an annual cap on taxable value increases of 3% which can later be accumulated and used with Portability.

Homestead and its Impact to your Home Purchase

When you purchase a home and the Lender is setting up your payment (Principal, Interest, Taxes, and Insurance), they are basing the taxes on the prior year’s tax bill. So, if the former owner had a homestead exemption, it is likely your payment will be based on the homesteaded rate. If the prior owner did not have a homestead exemption, your payment will be based on a non-homesteaded rate.

IF: The payment is based on a homesteaded rate and you apply for your own homestead – you will continue to enjoy the tax benefit of homestead exemption.

IF: The payment is based on a non-homestead rate, but you apply for your own homestead – you will see an adjustment to your tax bill in the following year.

IF: The payment is based on a homesteaded rate and you DO NOT apply for homestead – You will see an increase in your property tax bill in the coming year.

The Importance of Buying before midnight on December 31st

To qualify for a Homestead Exemption, the property must be your primary residence and you must own the home on midnight December 31st of the year of purchase.

Thus, if you purchase a home in 2018 and the closing takes place prior to midnight on December 31st of that year – you will qualify.

If, you purchase a home in January of 2019 – you will not qualify until the year 2020.

Wait to purchase and you could lose the Homestead Exemption costing you Hundreds of Dollars!

 

So, if you are considering a purchase in the next few months – make it a target to close on your new home by the end of the year. Here are a few other great reasons to buy now:

  • If you close on your new home in November, you won’t have a house payment until January
  • If you close on your new home in December, you won’t have a house payment until February
  • Interest rates are volatile. Lock in your rate now while they are still ranging from 4.5% – 5.5% don’t wait until they go up to the projected 6%!

 

For more information about homestead exemption and the benefit of closing THIS YEAR, contact your Real Estate Professionals at Hedstrom & Stamm Home Solutions, Keller Williams Realty. We are Always Here for You!

About Stacy Folsom

Stacy Folsom is the Office Manager and Team Coordinator of Hedstrom & Stamm Home Solutions LLC.