Many prospective buyers will get confused when trying to figure out the real estate taxes they will pay when buying their new home. When looking at the taxes of particular homes in the mls some will scratch their heads in the difference of taxes on homes that are similar and in the same neighborhood.
There are several factors that cause this. In Florida we have a homestead exemption which applies to homeowners who reside in their home as their primary residence. Homestead homes receive a $25,000 exemption on the assessed value of the home.
For instance if your homes is assessed at a value of $200,000, then you are going to be taxed on $175,000. The other part of the homestead is the save our homes cap which caps the amount the real estate taxes can be increased per year, which is currently 3% per year.
Homes that are not homestead are going to be taxed on the current market value of the home which can increase every year.
This is why you will see similar homes with different real estate taxes. Do not go by what the current owners are paying for taxes, the taxes are going to be reassed on the home you buy anyway. I will show you the easiest way to calculate and estimate what your taxes should be.
The best way to figure out what you are going to pay in taxes is to figure the home to be assessed at what you purchased it for. Let’s use an example. Let’s say you buy a home for $225,000 and you qualify for homestead. You are going to multiply $200,000 after your $25,000 reduction times the millage rate. In Hillsborough County the millage rate is roughly 21 which means for every $100,000 of value you will be taxed $2100 so in this case your taxes would be roughly $4200 per year. You can also use the Hillsborough county online tax estimator.
Now this is just for the valorem tax there are other non ad valorem taxes such as Water and Wastewater, SW Disposal. These you can estimate by going to the Hillsborough county tax records of the property you are buying and see what the previous owners paid for the past year.
Now your home may not necessarily be assessed at what you paid for it. It most cases it may be lower but go by the purchase price for worse case scenario.
This is prior to the recent amendment one bill that was passed this year which doubles the exemption to $50,000 and has portability of current homeowners who can transfer the save our homes exemption to a new home they purchase. I will have more information on the new exemption coming soon.
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We have a lot of confusion in Austin about Taxes. People frequently concentrate on the tax rate that the previous owner paid and will favor one 200k house over another 200k house based on the taxes. I agree its always best to look at the purchase price and determine what the worst case scenerio is.
I just wish homeowners could transfer tax exemptions to a new home. That sounds pretty appealing.
Ki is right about confusion. I also like the comment about wishing that exemptions could transfer to a new home. It makes a lof of sense to offer that and I wonder why the county has not addressed it.
In the Denver area taxes continue to get more complex from year to year. This year we had a statewide mill levy freeze, which initially sounds like a good thing; however, the freeze means that as property values increase the percentage taxed stays the same. Previously it was a sliding scale.
I wish the homestead and save are homes cap was applied to the rest of the country. The real estate taxes rose so fast with the home values in last few years some people are having hard time.
If you haven’t any idea on real estate taxes, start knowing it today. Seek help from reliable and well-experienced real estate agents. Update and be informed by great articles like this. Good post!
Great explanation! We get these questions all the time.
The only certainties: Death and Taxes. They finally revamped the property taxes here in Las Vegas. The state has been crying poor but hadn’t updated property taxes for years.
thanks for the explanation. And that’s a funny comment above (death and taxes). Yeah we just got our property taxes updated and the value of the property had went up $10k because of rehab, but so did the taxes…eeewwww , lol
Great article. Your explanation was very clear. We too, also get a lot of questions like this.
Great post. I have to explain this to almost every client I deal with. Particularly those buying REO properties and some of these homes that are actually underpriced.
thanks for clearing this up….we get alot of clients from our site yaerd.org asking this question…i’m going to bookmark this post and start referring them to it
GO Zone Real Estates last blog post..Why GO Zone Real Estate Investment?
Great post, I really enjoyed it. I will have to bookmark this site for later.
Great Post! I also find it hard to explain all the finer points of taxes. Even though we have extremely low property tax rates here in Utah I still try to refer them to there accountant or tax professional. This keeps me out of hot water and makes sure they get sound professional advice.
This is a very good post. Buyers need to know more information like this. Good job.
It is always interesting to see how things differ from country to country. In South Africa the taxes are set by Local Government and differ from town to town. Once set there is no negotiation.
Melanies last blog post..Get a free advert on South Africa’s hot new private house sale website.
Dan,
I see that property taxes are just as complicated in your neck of the woods as it is in ours. I feel sorry for many in my area because they don’t even take the time to fill out the forms or do not know to do so in an effort to reduce your taxes using the homestead laws. I think it is a great thing for you to make a post like this to help out consumers in your market place. I have been inspired to do one as well.
In Texas we have high property taxes. The good thing is we dont pay a state income tax so it all comes out in the wash. Our is like $3 per $1000 dollars spent.
The real estate taxes in Florida get more and more complex and confusing every year, it feels like. Figuring out the taxes is one thing to consider when living in or moving to Florida.
It is a bit confusing when it comes to calculate the tax. Most of the customers do not know how to do that. Thanks for the useful information on real estate taxes in Florida.
Thanks for adding this post. I answer questions everyday about tax rates within the same area and price range with and without the homestead ex. Well written post, thanks.
Nicely done…I used to live in Miami and Orlando but didn’t own property at the time. Yes, real estate taxes can be high in Florida but there are trade offs such as no income tax. In California (current residence), property taxes cap at 1% but with state sales tax at 8.25% and as high as 10.75% (not even mentioning income tax) you’re still going to come out ahead in Florida.
Thanks for the great info Dan. Every state is different and it’s interesting to see how other states calculate their taxes.
Thank you Dan for the info. I have been always known that taxes in Florida are low compared to other states. But astonished when heard about the complexity of the real estate taxes. But felt still worth of living or moving to Florida.
This is an excellent guide about Real Estate Taxes. Good work!
The homestead tax savings are really quite nice and I thought at first that figuring out taxes for Florida residents would be confusing when I first started reading, but that’s actually not the case.
This is a great article, such a great help. Taxes are confusing and we need to be guided most of the time. Some people can not even do it by themselves.
Thanks for the post. These days real estate market is going down. Bur Florida is one of the sate which is still growing. Great Job!