Lots of details about Florida's two types of 'homestead exemption'.

Carl: The question I have is the homestead exemption for your tax benefits, is there any other legal value to it?

Attorney Tom Olsen: There's two values to it, Carl, and both of them are important. First of all, if it's in the state of Florida, if it's your home and you've applied it, for a homestead exemption, and it's been granted to you-- Josh, will you pot Carl down for me, please? If it's been granted to you, then the tax appraiser's office will knock $50,000 off the assessed value of your home when calculating your real estate tax bill every year.

That will save you about $750 a year in real estate taxes if you have homestead exemption on your home. The second benefit is this, is that if it's your homestead, the tax appraiser's office cannot raise the assessed value of your home by more than 3% per year, and that can add up to huge savings. In normal times, your property normally goes up 3% per year. That's just historically what I think in terms of property appreciation, real estate appreciation, but when the real estate boom comes, all of a sudden your homestead was $300,000, now it's worth $600,000, they cannot reassess it to $600,000, they can only raise your assessed value.

It was $200,000, they can't do it by more than 3%, so next year it's going to be $206,000. Next year they're going to assess it for $213,000. Next year they're going to assess it for $222,000, whatever those 3% bumps are. That can be a huge savings for you for homestead exemption purposes, and what it means is that people who have owned their home for a long, long, long, long time, which there's plenty of people out there like that, their real estate tax bill is artificially low because the tax appraiser's office could not raise it by more than 3% per year.

When they sell it and the new buyer pays $800,000 for it, that's when the tax appraiser's office comes in and says, "Okay, now's our chance to jack up the assessed value of this property up to where it should be," or if you pass away and your kids inherit that house from you, that's when the tax appraiser has the opportunity to jack up the appraised value to where it should be.

Hopefully, Carl, you understand what I'm talking about, and so those are two values and over time it's that 3% cap that is what really saves people a ton of money. Carl, does that make sense to you?

Carl: Yes, the taxes do, but what about any other benefits like if you have a problem or someone tries to take your home from you, there's a lien put on it? [crosstalk]

Tom: Okay, Carl, great question.

Carl: Any protection there?

Tom: Thank you, ask for that. In the state of Florida, there are two separate things that have the same name, homestead exemption. So far we've been talking about homestead exemption as it applies to your real estate tax bill on the home that you live in. The other homestead exemption, completely different but has the same name, that homestead exemption comes from our Florida Constitution, which states that here in the state of Florida, no creditor may take away your home or place a lien against it.

Doctors, hospitals, credit cards, automobile accidents, don't pay your credit cards, somebody sues you, get in a terrible automobile accident, somebody sues you, they cannot touch your home or put a lien against it. Now, who can take away your home? If you borrow money from a bank and you sign a mortgage, and you don't pay your mortgage, they're going to take your home from you. If you have work done on your home, you build a pool, put a new roof on it, you don't pay the contractor or suppliers, they're going to take your home away from you. If you don't pay your federal income taxes, the IRS is going to take your home away from you.

It's not a blanket, but this homestead exemption applies to a lot of situations. Carl, does that answer your question for you?

Carl: One more point on it. If the government tries to put a lien on a home, as [unintelligible 00:04:19] it, under this Florida Constitution, do they have any benefit?

Tom: Carl, the federal law trumps our Florida Constitution. That's why I'm saying if you don't pay your federal income taxes, the federal government, the IRS can put a lien against your home and take it away from you. Carl, thank you for calling. We appreciate it so much. Chrissy, that was a great opportunity to review for people the importance of these homestead exemptions.

Attorney Chris Merrill: Absolutely. Again, you're right, Tom, that people don't always know about all of them. That's where-- again, that was a great overview and recap. Thank you for giving that and thank you for Carl asking that. That was great.

Tom: When I talk about people's real estate tax bills for their home being artificially low, well, thank goodness we have the benefit of that because we've owned our home forever. Our real estate tax bill, I consider it to be reasonable. Somebody down the street from us, they build a million and a half dollar house and they start from scratch, man, their real estate tax bill is like four times more than what ours is.

Chris: Correct. That's a factor in these last several years when people are going to buy a home, whether it's existing or building new, they have to factor in what the new taxes will be for them, not just what the current owner of that property.

Tom: Yes. By the way, I showed one of our new young lawyers that feature yesterday that when you go on Orange County Property Appraiser's website-

Chris: You can show.

Tom: -you can literally see what somebody's tax bill is. You can see it. It is public record. Anybody has a right to look at it. You might go, "Gosh, I love this house. It's a great house. I'd like to buy it. Their real estate tax bill is only $5,000 a year, man. I'll get that same thing when I buy it." They've got that artificially low because they're using that 3% Save Our Homes cap.

When you go out and buy that home for $900,000, tax appraisers got an opportunity to reassess the value of your property. Your tax bill is going to go from $5,000 to maybe $11,000.

Chris: Correct.

Tom: The nice thing about it is on the Orange County Property Appraiser's website, they have a button there, calculate what my taxes will be. I went in and did it with the young lawyer yesterday and we just played around with it. You click that button and says, okay, how much will you pay for it? Now you'll see what your tax bill is likely to be if you pay for it that amount.

It also has a button there that says, did you have a previous homestead? Are you porting it over? I want to cover that issue, this is that if you have a house that you've owned for a long, long, long, long time, and you've got an artificially low real estate tax bill because of the 3% cap Save Our Homes, and that's the SOH, Save Our Homes, you can portage it. If you go buy another home, you can take that artificially low tax savings and apply it towards the next home you buy.

Chris: As long as it's your homestead.

Tom: Exactly. Yes. When you're looking at this new piece of property that you might want to buy, that's why they want to know, do you have a previous homestead and are you going to portage it over? Good thing for people that have lived here for a long time. Chrissy, before the break we were covering just about every aspect there is about Florida homestead exemption, whether it has to do with your real estate taxes amount on your home or whether it has to do with them Florida Constitution that protects your home from creditor claims and people putting a lien against your home.

I think there's just one more thing I want to say about it, at least. I've been a lawyer in Florida for 43 years and I'm going to go back probably at least 25 years ago, 30 years ago when I became a new lawyer. As far as real estate taxes were concerned, it was a different type of homestead exemption. It was a different type of savings on your annual real estate tax bill.

That Florida statute said that if you have lived in the state of Florida for at least 5 years, then the property appraiser's website appraiser would knock off, I think it's 25,000 off the assessed value of your home every year. Okay, so qualified. You have to live here for at least 5 years before you get that $25,000 lowering of the assessed value and the savings of your annual real estate tax bill.

I'm sure the thinking is that, hey, I've lived here for five years, I've paid plenty of taxes for roads and schools and this and that. Somebody just moved into the state of Florida, they should be paying more taxes for me for a period of time so they can help pay for all the roads and schools that are already here. I'm sure that's the thinking. As you might imagine, some smart lawyer challenged that-

Chris: Because unconstitutional.

Tom: As unconstitutional.

Chris: They won.

Tom: It got struck down. This people-

Chris: Preventing that interstate [crosstalk]--

Tom: -from way back in the day might remember this, oh, you got to live here for at least five years. No, that's not the case anymore.

Chris: Correct.

Tom: You're entitled to homestead exemption the moment that you qualify. By the way, if you bought a home and you want to apply for a homestead exemption for the calendar year of 2024, you must have owned that home and moved into it prior to December 31, 2023. People say, "Well, you can apply for homestead exemption-

Chris: Until March.

Tom: -January, February, March, what's the big deal?

Chris: However you would have had to have--

Tom: Yes. If you bought a house in January 10th of 2024, yes, you can apply for homestead exemption January, February, March, but you're not getting it until 2025.

Chris: Exactly.

Tom: You know what I'm saying?

Chris: I do.

Tom: Okay. Keep going on this but the good news is that when you buy a home, you inherit that seller's tax bill for that calendar year. If the person you bought it from had a homestead exemption for 2024 and you bought it January 10th, 2024, the good news is you're going to get the benefit of their lower tax bill for the 2024. That's a lot.

Chris: It's a lot.

[00:10:57] [END OF AUDIO]