Amendment 10 “Save Our Homes” Value Cap

 

The Florida Constitution was amended effective January 1, 1995, to limit annual increases in assessed value of property with Homestead Exemption to three percent or the amount of the consumer Price Index, whichever is lower.  No assessment, though, shall exceed current fair market value.  This limitation applies only to property value, not property taxes.

 

When a house is sold, the cap and exemption are removed at the end of the calendar year, and taxes are calculated on the full market value, also call the Just/Market Value.  The property will fall under the limitations of the Save Our Homes Cap the second year of the new owner’s Homestead Exemption.  (Therefore, if a property owner applies for and receives Homestead Exemption for 2004, the Assessed Value will be capped in 2005.)  To determine taxable value, any exemptions are subtracted from the Assessed Value to reach a Taxable Value, which is then multiplied by the yearly Millage Rate set by the taxing authorities to reach the amount of tax due.

 

Because a change in property ownership will effectively “reset” the Capped Value, it is important to be aware when purchasing a new home that is benefiting from the cap, it can be expected that property taxes will increase the next year because the assessed value must be adjusted to equal current market value.

 

The increase due to the removal of the Cap may double or even triple taxes, depending on how long the previous owner had homestead exemption.  The table below illustrates this.  (For example, if the Millage rate for this fictitious property was 20.0000 mills, then the previous owner would have paid $800, whereas one year later the new owner would pay $1,700 a substantial increase.)

 

How the Cap works when a property sells:

 

                                                   Previous Owner’s CAP      1st Year of New SOH           2nd Year of SOH

Just Value (Increases with Market):        $100,000                                 $110,000                                 $120,000

Assessed (Capped) Value:                    $  65,000*                           $110,000                            $112,200**

Less Exemptions:                                  -$ 25,000                            -$  25,000                           -$  25,000

Taxable Value:                                      $40,000                               $ 85,000                             $87,200

 

*(For this example, the previous owner’s Assessed Value has been capped for several years and is therefore significantly lower than the current Just/Market Value.)

**(For this example, the property is Capped at 2.0% - actual cap rate will vary yearly.)

 

If additions or improvements are made to the property, the value of those improvements will be added to the roll regardless of the cap.  For example, if a pool is added to a property, the value can increase no more than the cap rate, plus the value of the pool.  If we correct such items as size, number of bathroom fixtures, installation of heat and/or air conditioning, the value of those corrections will also be added to the roll above the cap.

 

The cap does not apply to portions of multiuse or multifamily properties that are not homesteaded or rented to tenants.  In multiple owner situations where not everyone receives a Homestead Exemption, only the percentage of ownership the homestead owner possesses will be covered under the Save our Homes cap.  For two owners with one homesteaded and the other not, only half of the value of the property will be protected.  If another non-homesteaded owner is added, the capped percentage drops to one third.  The cap remains in effect upon the change of title due to divorce or death of a spouse as long as the remaining owner continues to live on the property as his or her permanent residence.