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Palm Beach Property Tax Update

Top Real Estate Agent, Lisa Treu and Brian Mudd of WJNO discuss the latest property tax update with special guest, Dorothy Jacks, Palm Beach County Property Appraiser. The benefits of a Homestead Exemption, Portability, changes to property tax and what to do if you think your assessment is off are discussed. 

To listen to the show, click here. 

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 now to encourage people to become Florida residents full-time. 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 permanent home as of January 1st. Once you have the homestead, which you have to apply with the Palm Beach County Property Appraiser's office, you can easily apply online. I love that you can do that. I mean, we get people who file at one o'clock in the morning, and I think of them at home in their pajamas. 

We added a great new feature this year where you can file the day you close now. It used to be that you had to wait until the deed updated onto PAPA, but not anymore. Now literally the day you close, you can sit down that night and file for homestead. And we're the ones that hold the application until your deed transfers. 

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. I always have to say that because it often is that less number. In fact, this year it's only 1.9%.

Everybody who is homesteaded, their assessed value just went up 1.9% this year. You'll see that on your notice too when you look at the market value adjustment. And that continues until you are no longer have the homestead benefit, which, as Lisa mentioned earlier, is when you sell. When you sell, your homestead goes away, and whoever buys your home does not benefit from your old homestead. They start fresh. We do what's called reset the market. So at that point, our office is instructed that since the seller is gone, we reset the market, and the new buyer has to start again at the market number. And now 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. And that's really important. We get so many people who get caught in that. They think, "Oh, well the taxes they're only $2000," and they are way more than that. And that's really good appreciation. It's great. Our market is moving so well. It's great that homesteaders are protected for the years they live in that home, but it's not so great for the person buying in if they're unaware of this. 

Applying for Homestead

There are additional exemptions that might be available too. Here is a list of additional exemptions

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 this time of year. 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. And in Florida, our system is a little bit more intense, simply because we don't have a state income tax. So property tax makes up more of the tax burden. And I think for especially people coming from other places, this notice can be a great eye-opener to what does your money go for. And it isn't just about that final line item, which may be $1,000, $4,000, $10,000. It's really about where does that $10,000 go. And you should know that because then you should be looking at what services am I receiving for this benefit. It's important. If you're paying your city a couple of thousand dollars a year, are you getting great roads and good sewer systems and repairs going on and fire service and so forth, and thinking about it that way. And this is that opportunity, the opportunity you have to actually interact with the taxes and what they're going for.

Things to consider when buying 

Taxes and HOAs, 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." And then the reality comes that it gets looked at again because you lose that homestead cap. And so it's important to have a real estate company that understands at least the right questions for you to be asking and looking at. And we look at the assessed value and the market value of the home they're 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 you're talking about is transparency. What you really have to pay, not what are the taxes today, and will that adjust once you purchase the home. And Dorothy, one of the first things to notice with the new statement, it does look like there is a different layout, and it looks like what you're talking about, transparency.

What we've tried to do this year is we've added color to this statement. One, because the cost of color is certainly a lot better than it was quite a few years ago. It enables us to do it responsibly, but also to help draw your eye to the right information and what you should be looking at. I like to tell people on the new form, the green, the color of dollars, is probably the amount that you're going to pay in tax. And some people, they just want the bottom line. But the form is now double-sided. If you flip the form over, on the blue side, as we like to call it, it shows what we've set your market value at. It also shows you all your benefits. And that's really important that people take a look at, make sure that if they applied for a homestead this year, they applied for a senior's exemption, that that's listed on the form. And also it shows the amount that their portability savings if they were to move, would afford to them. That's an important thing now with people moving around both in the County and around the state, that nice portability benefit, that's a sort of secondary benefit on top of a homestead exemption that people can have. The other place we really tell people, go to our website. And we're well-known for our website, pbcgov.com/papa, property appraiser public access. And as Lisa said, it's where you can see how much the taxes will probably be on a property that you're buying. Many, many people are caught in this terrible event where they look at the property, they say, "Oh well the property is only $2,000 in tax." And then they come to find out that it's not, it's $8,000 in tax a year. And it's a big shock.

But it's a good way, this resource, this notice, is a great way for you as a homeowner, if you're not moving, to make sure you're looking at, okay, what am I paying in tax, who am I paying it to. But if you're moving, you definitely want to be paying attention to the website and how much taxes are paid and how much they potentially could be.

What is Market Value and How is it Different to Property Value?

And to your point about the website, it really is that user-friendly. I keep a file with all of this information on hand. I am inclined when I look it up, just go to the website, because I can get to that in under 30 seconds. It's easier than going through the paper file with everything in there. Now Dorothy, one of the biggest areas of confusion is what that number, that assessed number, represents. That is not the property value of our property today, is it?

What we call market value, which is the name given to it by the State of Florida, is actually a value set by our 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. I mean, we couldn't do that, obviously. Year over year, that's going to change. But how we are instructed to do it is to look at the comparable properties to yours, just like they do in a private appraisal. All of us have had that done when we buy a property. 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. And that 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 that market value each year. But 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, which was yesterday, to file a petition with what's called the Value Adjustment Board. The Value Adjustment Board is a completely separate entity from my 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 those gentlemen and ladies act as mediators, if you will, of that conversation that we have. 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 us. We are valuing 630,000 properties every year. And we would love to hear from homeowners who tell us often, and it's interesting things they'll tell us that will affect their value. They may have had a flood, and the flood caused a great deal of damage and they had to have half their house torn down and put back together.

And we will adjust for that year, while they're doing those repairs to that property. Fire. Same thing. All kinds of situations that might have occurred. 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 us and give us that detailed information, sometimes we can adjust without even you having to go to a hearing. Our job is not to defend to the death our value. Our job is to make sure the value is correct. We're not interested in generating tons more tax dollars for anybody. Our job is to make sure that your 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? 

That's really what the notice does, is it lays out for you those differences. So the one side of the notice that looks completely convoluted is actually all of the taxing authorities that you pay, and they're listed there for you. And as you said, Brian, if you're in the unincorporated area, it's going to be a different list than if you're in, say, the city of Wellington. And you want to look through the list and see all the different things you pay, and then the columns explain how much it's going to be. Now it is just simply a rate that's adopted by those districts, multiplied by your taxable value, that is the number that we set. So the rate can of course adjust. 

And you can, on the very far right of the form, it gives you the date, time and place of public hearings, that 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. 

Take a look at the information and let's make sure that it's right because again, they can only take the information they have. And if there's a mistake, then they're happy to look at it. They are my favorite organization to work with on the government level in Palm Beach County. Because, why? They take your phone calls. They really do. They're exceptionally helpful, and they answer questions that others would say, "Go to the website," or whatever. They're available and they're helpful and they want to make it right. So that is number one, is to take a look at it. 

And then the reality is that I don't let a home-buying decision be based on taxes. I think it's about knowledge. If I know my taxes are going to go up, I just need to budget accordingly. The worst thing that happens is if you don't know, and then next year you have to pay taxes from this year plus the escrow for next year. You're getting hit over the head, where if I right away know that I'm going to need to set a $100 or $200 aside a month, it's not really that big a deal.

The Importance of Reading and Understanding the Statement

You bring up so many good points there. And Dorothy, it's one of the other things that are pointed out in these proposed property tax statements. When one's getting information about an HOA for example, not all HOAs are created equal for all the obvious reasons. But also in some cases, some will keep larger reserves that might make them a bit more immune against special assessments, whereas others kind of cut it close, and every time something comes out of the left-field, it's a special assessment that can really end up impacting people. We will see some more aggressive communities, not only in perhaps raising a millage rate given an opportunity but also for proposing special taxes. And you might have your neighbors that vote for these taxes. And so on here it'll also show any of those special assessments as well.

Absolutely. And that again is a good reason to read the form. I mean, I'll give you a good example. Last fall, the voters of Palm Beach County approved an additional one mill assessment. A mill is $1 for every thousand dollars of value. It's short for millage. A one-mill assessment for schools here in Palm Beach County. And it was approved by the voters. I think it's 70 plus percent approval. 

Well, this is the first time they will have seen that increase. So for everybody, the school, what's called by the local board, will have gone up, and that is not related at all to their value. That is totally related to that increase in the mill rate for that levy.  And so again, always a good thing when you see these voter-approved debt services, and voter-approved bonds, to think about that, that in the end it sounds really nice and it is important to fund our schools, no question, but how is it going to hit me? How is it going to affect me personally? And in this case, for every one of us, there will be an increase in that school line, which is from that voted debt. 

But there are lots of other things that are important just in cities. Some cities are now using what we call non-ad valorem assessments. So special assessments that are not based on value. Ad valorem means of value, so non-meaning not of value, which is also listed on this notice in the bottom half of the notice. But you're seeing a lot of movement of assessments to those special non-ad valorem assessments. So keep an eye on those too. 

And again, you said it earlier, Brian, local government is the closest government to us. It also has the most impact on our true day-to-day lives. Whether it's that pothole on your road, whether it's that the sewer hasn't been cleaned for a long time so it's backing up when it rains. Those are the sorts of things that your local government controls and those elections are important, and those taxes that they're charging us are important. 

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. Tell us about your scenario. Because, here's a couple of the really important ones. First of all, it's statewide. That's super. So if you're moving to the north part of the state, or we have a lot of people moving here from Miami-Dade and Broward County. We also have a lot of people coming down from Orlando. It's interesting. We watch the patterns in the portability applications. But certainly, also it works inside the County if you're just moving from one neighborhood to another.

It also is limited at, you can only carry up to $500,000 in cap savings. Now most of us don't have $500,000. But there are people that do. If you've lived in a home for a very long time, in a good part of town. I mean, think about the mom and dad who lived on a canal in North Palm Beach and they bought their home for 200,000. It's now worth 800,000. I mean, that's not unusual. They have 600,000. Well, they can only carry up to 500. That's another rule. 

The third is that 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. We're instructed to only take 80% of your port savings. It's pretty logical.

When you file for homestead, we automatically have you fill out a portability application. Just sign it. It's a simple form. We help you with it if you come in. If you do it online, it's two more questions on your homestead application online. It's really simple. And then we look into it for you because we don't want you to miss an opportunity. And the other beauty is if you're moving around the state, we handle that behind the scenes as well. We coordinate with the other county. You don't have to be going back to the other county and getting numbers from them and giving them. No. In fact, we do it all, it's great, via email. And we're constantly emailing with the other counties and gathering data. 

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%, 80 to 90% of the people who have portability are simply going from one home to another. And they're nice and simple. They sell a home and they immediately buy a home and they're moving from one to the other. But some people choose to do anything from travel the world or go live with a boyfriend or go to help their mom up north and live up there for a few years. 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 two years. And it's not two calendar years from when you sold. Let's say you sold today. It's August of 2019. Year one is 2020. You've got a homestead for 2020. Year two is 2021. So what that means is that if you have to qualify for a 2021 homestead, that means owning and occupying in December of 2020. So think about it. It's August. That's not two years. That's what, that's 14, 16, 18 months. Maybe not even 18 months. 17 months, something like that. It's pretty fast. December of 2020 that you got to be owning and occupying for a January 1st, 2021 homestead application. 

Now, I will tell you that the property appraisers around the state are struggling with this because it's a difficult thing. You have to tell people, "We're very sorry. You did qualify for this, but you missed it by months." This is a very difficult thing. We are asking the legislature to change it to three years. So you would at least have two full years that would allow us to do this movement. And we hope to have that in front of the voters next fall. It will have to be a constitutional change because this is in the constitution. 

I want to just tell you this one too. People often will sell a home because they want to build a home. But remember, if you're building a home, you have to live in it to get homestead exemption. So if it takes you 18 months, which is not at all out of the realm of possibility to build a home, you're renting that whole time, you might miss that portability window. Which is again, another one I had, even a personal friend of mine. They sold their home in Wellington. They bought their retirement home in Anna Maria Island. And they aren't going to live in it for a long time. They're going to stay here and rent, and then they're eventually going to move over there. I went over with her very carefully how long it would be before she needed to live there, in order to get homestead. So there's a lot of different scenarios. 

If you have questions, Treu Group Real Estate is here to help you. We are here to help.