November 19, 2007
Political Helping Hand for Florida's Existing Home Sales
Analysis of:
FAR, Gov. Crist launch group supporting property tax amendment | media.living.net
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Implications: The idea of having politicians involved in the solution of any problem of economics is,admittedly,frightening. However,congrats and kudos are in order for those members of the Florida Legislature which crafted the concept of real estate tax "portability" and,further,put forth the idea in a voter referendum to be held this coming January 29,2008.
Analysis: The move was backed by newly elected Governor Charlie Crist and was promoted as a real estate tax buffer for current homeowners in the state who have been struggling with higher ad valorem tax bills and through the roof insurance rates. But the measure,if passed by voters,could do much more. Realtors across Florida are heralding the kick start such an enactment could offer to their clients whose residential properties (both traditional & condominium) have been languishing on the market for months with no end in sight! So,what is tax portability and how does it apply to residential home sales?
The current Homestead Exemption for Florida primary residences is valued at $25,000. This means that any homeowner- resident of Florida is entitled to have twenty five thousand dollars exempted from the appraised value of the dwelling for real estate tax purposes. Homes valued at or below the $25,000 are exempted totally from property taxes. By a court ruling in 1969,this feature of tax exemption was extended to individual condominium units as well.
Since 1994,the homeowners of Florida have,by way of a constitutional amendment entitled Save Our Homes or SOH,had their annual property valuations capped at 3% or the change in the CPI (Consumer Price Index) whichever is less. The downside of this homeowner protection rests with its lack of continuance should a homeowner decide to move up. Once the residence is sold the new buyer and the former owner will be taxed at the full and current value of their new homestead purchases. This situation often results in wide disparities in tax valuations for similar homes on the same street.
The January 2008 referendum will cure that disparity by including tax portability. It will work like this:
Analysis: The move was backed by newly elected Governor Charlie Crist and was promoted as a real estate tax buffer for current homeowners in the state who have been struggling with higher ad valorem tax bills and through the roof insurance rates. But the measure,if passed by voters,could do much more. Realtors across Florida are heralding the kick start such an enactment could offer to their clients whose residential properties (both traditional & condominium) have been languishing on the market for months with no end in sight! So,what is tax portability and how does it apply to residential home sales?
The current Homestead Exemption for Florida primary residences is valued at $25,000. This means that any homeowner- resident of Florida is entitled to have twenty five thousand dollars exempted from the appraised value of the dwelling for real estate tax purposes. Homes valued at or below the $25,000 are exempted totally from property taxes. By a court ruling in 1969,this feature of tax exemption was extended to individual condominium units as well.
Since 1994,the homeowners of Florida have,by way of a constitutional amendment entitled Save Our Homes or SOH,had their annual property valuations capped at 3% or the change in the CPI (Consumer Price Index) whichever is less. The downside of this homeowner protection rests with its lack of continuance should a homeowner decide to move up. Once the residence is sold the new buyer and the former owner will be taxed at the full and current value of their new homestead purchases. This situation often results in wide disparities in tax valuations for similar homes on the same street.
The January 2008 referendum will cure that disparity by including tax portability. It will work like this:
If you move to a more expensive house, you can take your full SOH savings differential with you, up to $1 million. For example,
Current House Just Value $300,000
Current House SOH Value $200,000
SOH Differential $100,000
New House Just Value $500,000
SOH Differential $100,000
New House SOH Value $400,000 (this is your new taxable value base)
If you move to a less expensive house, you get a portion of your SOH savings, equal to what percentage the old house value is to the new house. Again capped at $1 million. For example,
Current House Just Value $300,000
Current House SOH Value $200,000
SOH Differential $100,000
New House Just Value $175,000
SOH Differential 175,000/300,000 = 58.3% 58.3% X $100,000 = $58,300
New House SOH Value $116,700 (this is your new taxable value base)
No question,this will be an advantage to the market,Realtors,and Florida home sellers and prospective purchasers. Florida voters must approve the ballot initiative by 60%,so the homebuilders and real estate professionals along with Florida government must begin to sell the idea with the short window of opportunity remaining.
It is a good example of politics actually assisting the constituency.
No question,this will be an advantage to the market,Realtors,and Florida home sellers and prospective purchasers. Florida voters must approve the ballot initiative by 60%,so the homebuilders and real estate professionals along with Florida government must begin to sell the idea with the short window of opportunity remaining.
It is a good example of politics actually assisting the constituency.
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