The Florida Homestead Exemption and the Save Our Homes Cap, Explained

Photo: P. Hughes, CC BY 4.0

Ask a Florida homeowner what they pay in property tax and the answer often has less to do with the house than with how long they have lived in it. That is the homestead system at work. For a buyer, it is one of the most important things to understand before an offer, because it explains why your first tax bill can look very different from the seller's. Here is how it works, in plain terms.

What the homestead exemption is

If a Florida property is your permanent residence, you can apply for a homestead exemption with the county property appraiser. In Miami-Dade, that is the Miami-Dade Property Appraiser. The exemption removes a set amount of the home's assessed value before tax is calculated. Part of it applies to every tax on the bill, and part applies to everything except school taxes.

The dollar amounts are set by the state and part of the exemption is now adjusted over time, so we do not quote a figure here. The property appraiser publishes the current numbers each year.

The exemption itself is useful. The bigger benefit is what comes with it.

Save Our Homes: the cap that grows in value

Once your home has a homestead exemption, the Save Our Homes amendment to the Florida Constitution limits how much its assessed value can rise each year. The increase is capped at 3 percent or the change in the Consumer Price Index, whichever is lower, even if the market value of the home rises much faster.

Over a few years that gap is small. Over ten or twenty years in a place like Coral Gables or Coconut Grove, it can be very large. A long-time owner may be taxed on an assessed value far below what the home would sell for today.

Here is the part buyers need to hear: the cap does not transfer with the house. When a home sells, its assessed value resets to market value as of the following January 1. The seller's tax bill reflects the seller's years of savings. Yours will start from the price you paid.

That is why we never use the seller's current tax bill to estimate a buyer's carrying costs. We estimate the tax on your purchase price instead, and we show you both numbers side by side.

Who qualifies, and when to apply

The rules are specific, and the property appraiser makes the final call. In general:

• You must own the home and make it your permanent residence as of January 1 of the tax year.
• The application is due by March 1 of that year. Miami-Dade accepts applications online.
• A family unit can hold only one homestead. Married couples cannot claim two.
• You will be asked for documents that show Florida residency, such as a Florida driver's license, vehicle registration and voter registration.
• Buyers who are not U.S. citizens generally need permanent residency to qualify. If your status is different, ask the property appraiser directly before you count on the exemption.

Timing matters. If you close in February and move in right away, you have missed January 1 of that year, so the exemption starts the following year. If you close in December and move in before the new year, you can apply for the coming year. We point this out to clients when they are choosing a closing date.

Portability: taking your savings with you

If you already have a Florida homestead and you sell it to buy another Florida home, you may not have to start from zero. Portability lets you transfer some or all of the Save Our Homes benefit you built up, the difference between your old home's market value and its assessed value, to the new homestead.

How it works in general terms:

• Moving up. If the new home is worth more than the old one, you can generally carry over the full accumulated benefit, up to a cap set in the constitution.
• Downsizing. If the new home is worth less, the benefit is reduced in proportion to the difference in value.
• The window is limited. You have to establish the new homestead within a set period after leaving the old one. The property appraiser can confirm the deadline for your dates.
• It is not automatic. You file a portability application together with the homestead application on the new home.

For an owner who has been in a Miami home for many years, portability can be worth a great deal. It is one of the first things we ask about when a client plans to sell one Florida home and buy another, because it can shape both the timing and the budget.

What the homestead does not cover

A few things buyers often assume, and should not:

• Second homes and rentals do not qualify. A property you do not live in permanently has no homestead exemption and no Save Our Homes cap. Florida does limit annual assessment increases on most non-homestead property to 10 percent for non-school taxes, but school taxes are not capped, so the bill can rise faster.
• Renting out your homestead can cost you the exemption. Florida treats renting the whole home as a sign you have abandoned it as your residence, with narrow exceptions. Ask before you list it on a rental platform.
• Improvements can raise the assessment. Adding square footage or a major renovation can increase the assessed value beyond the cap. Routine repairs generally do not.
• There are other exemptions. Seniors with limited income, veterans with disabilities and some other owners may qualify for additional exemptions. The property appraiser's office lists them.

Florida's property tax rules are also amended from time to time, sometimes by the legislature and sometimes by voters. Before you rely on any figure, check the current rules with the property appraiser or a tax advisor.

How this changes the way you budget

When we prepare a buyer's numbers, the property tax line is built from the purchase price, the current millage rates for that address, and whether you will claim homestead. In Miami-Dade, millage differs by city and taxing district, so the same price can produce a different bill in Coral Gables, Miami Lakes or the City of Miami.

At closing, the year's taxes are prorated between buyer and seller based on the seller's bill. That bill may include the seller's homestead. The following year, you receive your own bill, based on your assessment. Plan for the second number, not the first.

How we help

We walk every buyer through the homestead math before an offer goes in: the estimated tax on your price, the first year you can claim the exemption, and what portability could bring if you are selling a Florida home. We coordinate with your tax advisor when your situation needs one. Tell us what you are planning and we will run the numbers with you, or browse homes for sale in Coral Gables to start.