Understanding Florida Homestead Law

Posted by DL Admin on Tuesday Oct 29, 2024 7:31 pm

 

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Authored By: Rachel Reyes-Silva, Esq., rreyes-silva@dunlapmoran.com

Florida's homestead law is a cornerstone of homeowner protection, offering significant benefits and safeguards. If you're a new homeowner or looking to reduce your property tax burden, understanding these laws is crucial. For Realtors, a clear comprehension of these laws is indispensable.

What is Homestead Property?

Florida homestead property is a natural person’s principal residence, which can include up to one-half acre of contiguous land in a municipality or 160 acres in an unincorporated county. All contiguous property is included in the homestead, even if the contiguous property has separate legal descriptions and tax numbers.

What is the Florida Homestead Tax Exemption?

The homestead tax exemption statute, in section 196.031, reduces property taxes by lowering the assessed value of a home by $50,000 ($25,000 as to school district levies) and capping annual increases in the assessed value of the homestead at 3% or the annual Consumer Price Index (CPI), whichever is less. Homeowners must apply for the homestead tax exemption with the county where the property is located.

Who Qualifies for the Homestead Tax Exemption?

To qualify for the homestead tax exemption:

  • The property must serve as the primary residence of a permanent Florida resident.
  • The homeowner must have owned and lived in the property as of January 1 of the calendar year for which the exemption applies.
  • The property cannot be rented out for more than 30 days in a calendar year.
  • This exemption does not extend to secondary homes or investment properties and/or to properties owned by corporations, LLCs, or partnerships.

Why is Homestead Protection Important?

Protection Against Forced Sale by Creditors

One of the key benefits provided by Florida’s homestead laws is protection against forced sales by creditors. In the event of a civil judgment, creditors cannot seize the homestead to satisfy debts. However, this safeguard does not encompass all types of liens. While involuntary liens are shielded, voluntary ones such as mortgages, mechanics' liens for home improvements, and tax liens remain enforceable. Homestead protection can be voluntarily waived, typically in mortgage agreements, as a condition of securing financing. Homeowners should understand the implications of waiving homestead protection and seek legal advice before entering such agreements.

Asset Protection and Estate Planning

For asset protection, the homestead exemption automatically applies when the homeowner occupies the property as their permanent residence. However, fulfilling homestead tax exemption requirements entails specific filing procedures. These requirements vary by jurisdiction so homeowners should consult with legal professionals or tax authorities to ensure compliance with relevant regulations and to maximize available benefits.

Even after the homeowner's death, the protection conferred by the homestead exemption remains, serving as a vital component of estate planning. The property is exempt from probate proceedings and cannot be used to settle the deceased's outstanding debts, safeguarding the interests of heirs and beneficiaries.

Homestead Tax Exemption Today

In recent news, Governor DeSantis recently signed a bill to adjust property tax exemptions in Florida annually with inflation. The bill allows for an additional $25,000 property tax exemption which will be adjusted for inflation every year on January 1, based on the annual increase in the Consumer Price Index (CPI), as long as the CPI shows a positive change. This additional homestead tax exemption applies to a homestead's value between $50,000 and $75,000, exempting that amount from all taxes except school district taxes. For example, if CPI increases 5%, the additional benefit will become $25,000 x 5% = $1,250 + $25,000 = $26,250. With the higher exemption amount, homeowners will see a more substantial decrease in their annual property tax bills, providing noticeable financial relief. If approved by voters in November, the bill will take effect on January 1, 2025 as Amendment 5 to the Florida Constitution.

A thorough understanding of Florida's homestead laws empowers Realtors to provide invaluable guidance, safeguarding their clients' most significant investments—their homes. For homeowners, these laws offer essential protections and financial benefits, making it crucial to stay informed and seek professional advice when needed.

This blog is intended for informational purposes only and it is not intended to be, nor should it be construed as, legal advice or legal opinion.  The reader should not consider this information to be an invitation to an attorney/client relationship, should not rely on information presented here for any purpose, and should always seek the legal advice of counsel in the appropriate jurisdiction.