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“Property Tax Exemptions or Classifications – Are You Getting What You Deserve?”

By Elizabeth J. Daniels | Categories: Business & Tax Law, Land Use, Real Estate & Finance | Share January 2014

Elizabeth J. Daniels and Caitlein J. Jammo

At the start of each year, property owners should check for possible savings on property taxes.  Are you entitled to any exemptions?  Have you bought any new properties, changed any uses, or considered whether any of your properties are entitled to any special classifications? The status of each property is evaluated as of January 1 of each tax year. Property owners must complete their exemption or special classification applications and submit before the end of February each year.1  So, time is of the essence in evaluating any options for property tax savings.

Generally, all real property in Florida is subject to an annual ad valorem tax that is computed based on the market value of the property.   There are exceptions.  Some owners or uses (for instance charitable, non-profits, and certain agricultural or waterfront uses) are eligible for exemptions or special classifications that reduce the values on which one’s tax is based.  Informed owners that timely apply can realize substantial tax savings.  Some of the better-known special treatments are: homesteads, agricultural properties, educational or religious parcels, various charitable or historic uses, working waterfronts, affordable housing projects, and homes for the aged.

In order to have property either exempt or specially classified, the owner must complete a formal application process.  The owner and use of the property must comply with the statutory criteria as of January 1, and the owner must submit an application with supporting materials by the end of February.  We can help you understand what data is needed for any of the various exemptions.  Then, you must gather your back-up materials and timely submit your request.  If you fail to do this, you will lose the chance for a valuable exemption for a full year.

For residential properties, the homestead property tax exemption is the most important and has several aspects to it.2  It can yield significant savings each year.  If an owner makes a residence their true permanent abode,3 the owner will qualify for an exemption of $50,000.4  This amount is subtracted from the market value of your home to reach the final taxable value.

Another helpful long-term savings tool is known as the “homestead cap”. Starting with the next year after establishment of a residence as one’s homestead, the cap limits any future increases in value to the rate of inflation or 3%, whichever is less. As real estate market values are increasing after several stagnant years, the cap feature will be important. Owners need to pay attention to their tax notices to be sure that they are receiving this valuable treatment.  As market value increases and the cap artificially holds values down for tax purposes, the spread between these values becomes a savings buildup. Further, this savings buildup is portable if an owner moves from one Florida residence to another. The “portability” rules are complicated, so be sure to ask your attorney or staff at the county assessor’s office for assistance. As with all tax provisions, you need to be timely in requesting to “port” a homestead tax savings to a new property. The deadline is two years from leaving the prior homestead if you establish a new homestead by January 1.5  In addition to the “regular homestead” benefits there are additional exemptions for seniors who have either resided at the home long-term or who have a household income less than the threshold amount, and servicemen and women, who meet certain qualifications or are disabled as a result of service.

Special classifications are another area to explore.  Rather than exempting a set dollar amount from market value, special property classes allow a property to be valued on a lower basis than market value.  In order to protect important state interests such as ground water and preserving rural lands, Florida statutes permit certain parcels to receive a special use classification.  If so classified, the parcel will be valued at a fraction of its true market value, thus drastically reducing the annual property tax.  The most well known special classification is for agricultural lands (often referred to as Greenbelt).  For example, while some vacant land might be worth $20,000 an acre due to its development potential, if it in fact is used for pasturing cattle, then it will be set at $300 per acre value for property tax purposes.  In order to be classified as agricultural, the land must be used for bona fide, commercial agricultural purposes.  But this does not simply cover pastures and groves.  Rather, it also includes timberland, fish farming, tropical fish farming, sod farming, floriculture, viticulture, beekeeping, and potentially other uses.  Special treatment is also sometimes available for working waterfront parcels.6  Without such treatment, some older marinas or “mom and pop” motels had become impossible to afford from a tax standpoint.

Obtaining a property tax exemption or becoming categorized under a special classification can be quite financially beneficial but can also be a tedious administrative process.  Therefore, if you have questions or are interested in determining whether your property can be exempt or fall under a special classification, please call us to help you examine your options.  Often valuable exemptions are lost or much additional expense is incurred because the paperwork submitted by owners is incomplete or steps to become properly qualified have not been timely taken. We can help you get all of your ducks are in a row and avoid a loss of rights or the expenses to appeal the denial of a deserved exemption.

So, as the New Year begins, think about how you might obtain some savings on your property taxes.  We will be happy to discuss your property holdings with you and evaluate whether there are any exemptions or special classifications that you should apply for while the time is ripe.

 


1 Depending on the type of exemption or special classification, the exemption may automatically renew from year-to-year until there is a major change (such as an ownership change) some have short form renewals and some may require full application papers each year.

2 The term “homestead” has several distinct meanings in Florida law. Two of which are not related to ad valorem tax. There is a constitutional protection of homestead against claims of creditors and also certain inheritance protections. For more information regarding homestead in the context of probate and inheritance, see Brandon D. Bellew, HOMESTEAD, You May Own It but That Does Not Mean You Control It, (May 14, 2013).

3 Whether a property is one’s permanent abode is determined on a case-by-case basis and cannot be quantified by residing in the home for a set number of days each year. Occupancy of the home and intent to make the property his/her permanent home in good faith is the key. Rental of the home will generally forfeit the exemption.

4 The first $25,000 of market value of a residential property is entirely exempt. After that, the first $25,000 above $50,000 in market value is exempt from non-school taxes.

5 This example is given by the Pinellas County Property Appraiser’s Office. If you moved during 2012, your home retained the exemption until December 31, 2012. You have until January 1, 2014 to qualify for a new exemption and port the old benefit to your new homestead.

6 These properties “include public marinas and drystacks, public access points to navigable waters, properties used for commercial fishing, and water dependent marine manufacturing, commercial fishing, and marine vessel construction/repair facilities” according to the Pinellas County Property Appraiser Office.


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