Palm Beach Property Tax Update
Property taxes are an important topic when it comes to owning property in Palm Beach County. There is so much to understand to make an informed decision including the benefits of a homestead exemption, portability, changes to property taxes when you buy and what to do if you think your assessment is off are discussed.
How does Homestead Exemption Work?
The Homestead Exemption is an amazing benefit that saves residents of Florida a substantial amount of money. This is not a one-time saving, this is year after year. The homestead exemption has been around for a very long time and rewards people that make Florida their homesteaded state. It is becoming more popular for people seeking to make Florida their homestead now that the federal tax laws have changed. Homestead exemption is becoming an even bigger benefit. People are moving here because it's a favorable tax state.
How to Qualify for the Homestead
To qualify for the homestead exemption, you need to own and occupy your Florida your home as of January 1st and you plan to occupy the property at least 6 months and a day. You can apply with the Palm Beach County Property Appraiser's office, you can easily apply online.
You no longer need to wait until the deed is updated into the PAPA site. Now literally the day you close, you can sit down that night and file for homestead.
Benefits of the Homestead Exemption
Once you have a homestead, it's an initial $25,000 deduction from your assessed value. If you are in a home worth more than 75,000, you get another $25,000 reduction. The big benefit of homestead comes after that, and that is the cap, what's known as the Save Our Homes or 3% cap. That is a cap that says that each year, as long as you're homesteaded, your value will only go up 3%, or the change in the consumer price index, whichever is less.
When you sell, your homestead goes away, and whoever buys your home does not benefit from your old homestead. They start fresh. The savings that the prior owner had goes away. At that point, the market value and assessed is reset, and the new buyer has to start again at the market number. They can file for homestead and they can start the cap. But it's at that new number. So you can never regain back what that old owner had. That's really important to understand what the potential tax liability will be for you when you buy the property. We get so many people who get caught in that. They think, "Oh, well the taxes are pretty affordable," and then they are shocked when the new proposed taxes come out.
There are additional exemptions that might be available too. Here is a list of additional exemptions. The widow exemption has increased.
How to Understand the Proposed Property Tax Statement
It's helpful to have your perspective as well because it's easy to be reasonably informed and still not fully understand what our property taxes mean or what this proposed statement looks like. It's all detailed, it has numbers, it has different entities that we're paying to, but still, how it all comes together, it can be somewhat confusing. So as we are taking a look at our proposed property tax statement, how is it that you would position people understanding this, and in a way that might make the most sense to them?
The amount of information has improved for the homeowner. The notice is required by law. Every taxpayer in Florida is receiving a notice around the middle of August. And what it does is just details all the taxing authorities that collect from us. Many of our residents are coming from somewhere else. And I always think it's important to say property taxes in each state are very unique. In Florida, our system is a little bit more intense, simply because we don't have a state income tax. Property taxes make up more of the tax burden. Your statement will show you where your tax dollars are going which allows you to make sure your tax dollars are being well spent.
Things to consider when buying
Taxes and homeowners association fees, are the two things that often are the tipping point for a buyer. The challenges with HOAs, the fees are the fees. Taxes are not that easy, because if someone has lived in that home for 10 years versus maybe an investment property that doesn't have a homestead exemption, people will think, "Oh, that's cheaper." Then the reality comes that it gets looked at again because you lose that homestead cap. ou should look at the assessed value and the market value of the home you are considering, because that tells a story of what we can expect next year, after they purchased the home, on what their expenses are going to be.
What is Market Value and How is it Different to Property Value?
What we call market value, which is the name given to it by the State of Florida, is actually a value set by the Property Appraiser's office based on sales and data about a comparable property to yours. We do not value your property based on what you paid for it. How we are instructed to do it is to look at the comparable properties, just like they do in a private appraisal. You're looking at comparable properties, but we're doing it in mass. So where you might live in a neighborhood of 200 homes, last year maybe 10 of those homes sold. What did those homes sell for and what does that tell us about the neighborhood? Is the property appreciating, is it depreciating, or is it staying about the same? And that's how we are setting your property value each year. The market number, which is on this notice, is going to change probably every year. We adjust it based on sales, especially now with the market moving the way it is and has been for some time. We're adjusting the market value each year. The market value is just the starting point. It's set, and then from that, we are going to reduce it, if you're homesteaded, by your homestead, but also by any cap savings that you have from your homestead.
Is There a Way to Dispute the Assessed Value?
The notice states that you have 25 days from the mailing of this notice, to file a petition with what's called the Value Adjustment Board. The Value Adjustment Board is a completely separate entity from the Property Assessor's office. It is overseen by County commissioners, school board members, and some members at large.
They hire a set of what are called special magistrates, who are fee appraisers. They're private appraisers trained in this field and they actact as mediators. Our office presents how we came to your value, and you as a homeowner or as a business owner, certainly of any property, present why you feel that the value isn't correct. Do you have additional information regarding sales? Maybe you have information about something's happened to the property, maybe something's changed in its zoning, or what you're allowed to do with it. All those things can affect value. And that magistrate who is, again, independent from us, will make a decision, and that decision is binding on us. We simply accept the decision and move forward from there.
But before you get to those hearings, which can sound a little overwhelming, we always encourage people to call the Property Assessor's office. They are very helpful and will discuss the value with you. If there is something that has been missed, they will often resolve it without having to go before the hearing.
If you have had a floor or fire, it is important to share that information with them so that they can adjust for that year. Maybe something happened in the neighborhood. Maybe the streets had been torn up that year so nobody could get into the community. Or if they did, they certainly didn't want to move there and buy a home. All those things can affect value. And if you can call the property assessor and give them that detailed information, sometimes we can adjust without even you having to go to a hearing. Their job is to make sure the value is correct.
When we're talking about overall tax increases that might be there, the assessment is what it is, but ultimately we all have our different taxing districts. That could change from not only municipality and municipality, but unincorporated areas as well. So some of the differences we might see, might not have any difference to do with your assessment. How has that all come together for this final package?
As far as the milage rate, that is not controlled by the property assessor. You do have say about that too. You can attend hearings which are on your propsed tax bill. You can go to each of these taxing authorities and say, "Hey, we think the amount you've raised us this year is too much and we think you should adjust your rate, lower your rate," which they can do at that point. I mean, this is the idea. That's what you elect a city commission or an oversight body for, is to listen to your concerns about if the tax rate is going up too much. And you should go. People should go. There aren't a lot of people at these meetings. Some people think, "Well I'm going to go to a public meeting and there's going to be a hundred people, and I'm going..." No. These tax hearings are often quite low attendance. And I always say go on down there and see how your government is functioning. It's important. I mean, this is money. This is coming out of your pocket.
What Is the Difference Between Portability and Capped Value?
Portability is .a wonderful benefit that we have with a homestead property. It can be used when we move within Florida.
Portability is if you've lived in that home, you've built up some savings. And so the difference between your market value and your capped value, or what we also call assessed, and that's again, a word the state asks us to use for it, but it's really your capped value. It builds up over time, the difference between those two numbers. That is your portability number. And also on the notice, you can see it. It does report it on the blue side of the form, the Save Our Homes amendment cap savings are listed. And that basically is your portability amount.
Portability has a lot of rules, and we really encourage you to call us and go over the rules with us and go over the what-ifs.
1. You can only port your savings if you stay in Florida.
2. It also is limited up to $500,000 in cap savings.
3. If the number differs depending on if you're going into upsizing into a more valuable home or downsizing into a cheaper home. If you're upsizing, you can take up to as much as you have to the new home. If you're downsizing, we're instructed to calculate the percentage value of the old to the new. So let's say your new home is only worth 80% of your old home. Then you can only take 80% of your port savings.
When you file for homestead, automatically you fill out a portability application. Just sign it. It's a simple form. If you do it online, it's two more questions on your homestead application online. If you're moving around the state, it is handled behind the scenes as well. You don't have to be going back to the other county and getting numbers from them and giving them. Palm Beach County does it all, via email.
What Happens to your Savings if You Don't Buy Immediately
This is important to make sure you maintain your ability to benefit from your prior cap savings.
What happens if somebody sells their home and they don't buy right away, how long do they have to port those savings?
That's the one last rule that I'll go over. And it is often the gotcha rule. So the law talks about that you have two tax rules in which to move your savings. Now probably 80% to 90% of the people who have portability are simply going from one home to another. And that is nice and simple. They sell a home and they immediately buy a home and they're moving from one to the other. Some people choose to do anything from travel the world or maybe they decide to rent because they're not sure where they want to buy.
The key is, is that the cap savings have an expiration if you will. You have to use it within a window of three years. And it's not two calendar years from when you sold. You have three tax seasons.