How homestead exemption can lower the real estate taxes on your home

Attorney Tom Olsen: Let's talk about what you were talking about, and that is real estate taxes. Here in the state of Florida, there is a real estate homestead exemption. There's two types of exemptions, but we're going to focus on the one that has to do with your real estate taxes. If it's your home and you've applied for a homestead exemption, and it's been granted to you, they will do two things for you.

Number one, they're going to knock $50,000 off the appraised value every year. That's going to save you about $750 a year in real estate taxes over somebody who does not have homestead exemption.

Number two, they cannot raise the assessed value of your home by more than 3% in any calendar year. What that means is that people like you and me, where we've owned our home for 20 or 25 years, our real estate taxes are artificially low because the tax assessor's office cannot raise the value by more than 3% per year.

What happens is that when somebody passes away and the kids inherit the home, or if we were to sell our home and somebody were to pay full retail value for it, boy, that's when the tax collector's office creates a big bump in what the value of that property is and what the real estate tax bill is going to be. I think that that's a very unpleasant surprise for people that maybe they don't get it until the last minute.

Attorney Chris Merrill: I agree. I think that that's one of those things where they don't until the last minute. Again, maybe that was not the case in this situation, but I think for a lot of people, it is something that they're not factoring into the equation necessarily on the front end.

Attorney Tom Olsen: I think when you're buying a home, one way or another you're made aware as a buyer that last year, 2021, real estate taxes were $7,000. Then they're thinking, "Oh, hey, I can handle that. No big deal." Now that they paid $700,000 for the home, and the Orange County tax collector has the ability to reassess the value of the home based on that $700,000 purchase price, now all of a sudden the real estate taxes are going up to $14,000 or $15,000 a year. Oh man, a buyer's thinking, "I didn't factor that in to what my monthly nuts on this thing's going to be."

Attorney Chris Merrill: Exactly.