The frequently asked questions about real estate tax in Florida
As property and tax accountants, we are regularly asked about real estate tax in Florida. We will look to answer the below questions in this Article.
“Are you paying too much real estate tax in Florida?”
“What are the basics of the real estate tax in Florida?”
“How do Florida property taxes work?”
“Who is liable to pay property tax in Florida?”
“How and when is property tax collected in Florida?”
“What is the Florida property tax rate?”
“Are there any property tax exemptions in Florida?”
“What taxes are paid when selling a property in Florida?”
“How can I avoid paying property taxes in Florida?”
“How does this affect our American readers?”
You may also be interested to know more about Business or real estate investments in the US if you are a resident in the UK thinking about moving or living in the US, or if you live in the US and thinking about investing in the UK, our services for Business or real estate investments in the UK may be of interest to you.
Are you paying too much real estate tax in Florida?
Our property tax specialists help over 1,000 monthly retained landlords and property investors minimise tax while building their wealth.
There are many reasons people pay far more real estate tax in Florida tax than they need to. This is because:
There are many reasons why British people living in the United States pay far more tax than they need. This is because
-They do not know what they do not know.
-They have not spoken to a tax specialist that knows all the UK and US tax laws
-Their accountants in the UK are not knowledgeable when it comes to the US tax laws under the IRS
-Their CPAs are not knowledgeable when it comes to the UK tax laws under HMRC
What are the basics of real estate tax in Florida?
As Expat tax experts dealing with property real estate in the US, we know that the subject of real estate tax in Florida is confusing.
Property investment in Florida offers superb opportunities to make significant returns.
Florida has hundreds of miles of beaches, with Miami being well-known for its Latin-American cultural influences. Orlando is world-famous for its theme parks, including Disney World.
Florida is the third-most populated US state, with more than 21 million residents.
Florida also has the fourth-largest economy of all 50 US states, worth $1 trillion. If it were a country, Florida would have the 16th largest economy in the world.
Florida doesn’t tax income at a state level, but real estate tax is mandatory.
Property tax is a taxation system that requires owners of land and buildings to pay an amount based on the value of their land and buildings. Real estate taxes vary from state to state in the US.
Paying property taxes provides cash for the local economy and community across Florida.
Real estate taxes are put towards public schools and infrastructure, including roads and medical services.
The IRS provides clear tax information for property owners in Florida and other states.
If you require professional advice about real estate tax in Florida, speak to an expert.
How do property taxes work in Florida?
Florida’s property tax collection process begins with property appraisal, with a value being placed on real estate.
Every Florida county has a property appraiser, an elected official responsible for the county’s annual appraisal of all real estate in the county.
This is usually done through mass appraisal, utilising a systematic analysis of market data to assign values to multiple properties in Florida at once.
Real estate tax rates in Florida are applied to a property’s assessed value, not the appraised value.
Assessed value takes into account any appropriate and allowable exemptions on real estate taxes.
The most widely-claimed real estate tax exemption in Florida is the Homestead Exemption.
This can be claimed on owner-occupied residences to protect the home’s value from property taxes, any creditors and disputes or challenges that may arise from the death of a homeowner or spouse.
It allows the first $25,000 of a property’s assessed value to be exempt from all real estate taxes and exempts another $25,000 from non-school property taxes in Florida.
Revenue collected from property taxes are used for multiple public services throughout Florida, including law enforcement and first responders, government services, local levies, land construction, refuse collection, recreational services and protective services.
If you are unsure whether you can claim any real estate tax exemptions in Florida, speak to a property tax expert today.
Who is liable to pay property tax in Florida?
If you own real estate as an individual or a business, you are liable to pay property tax in Florida.
If the property was gifted to you as part of an estate, or you own it as a rental property, you are still liable to pay property taxes in Florida.
The amount of real estate tax payable in Florida does not have a minimum or maximum amount owed.
If you pay a mortgage on a property, you are already paying property tax.
A standard mortgage payment in Florida often includes principal, interest, homeowner insurance and property tax.
Review your current mortgage statement to see if your property taxes are paid as part of your monthly mortgage. It will usually be listed on each statement.
The local property appraiser will set the assessed value of property in Florida by January of each year, based on the housing market data from the previous calendar year.
Local municipalities, not the state, determine real estate tax rates in Florida.
Property owners who are widows, widowers or disabled veterans can receive a credit against some property taxes owed.
To be eligible for any property tax reduction or exemption, the person’s property must be their principal residence and not a rental property or second home.
Different statutes determine how each county assesses property values.
To discuss potential tax reductions or exemptions on your Florida property, get in touch with a property tax specialist today.
How and when is property tax collected in Florida?
Property tax in Florida is due on 01 March annually.
Real estate taxes in Florida can be paid from 01 November of the previous year. A one per cent discount is given on the overall property tax bill for every month paid in advance.
The Florida constitution reserves all revenue from real estate taxes for local governments. The state does not use any of the money.
Increases in property value are limited to 3% of the previous year’s assessment or the Consumer Price Index (CPI), whichever is the lowest.
Property tax bills are issued in late October, with full payment due by 31 March of the following year.
Taxes are based on millage rates set by local governments, with 10 mills equaling 1%.
The millage rate is multiplied by the property’s value to determine a dollar amount of tax owed.
County, city and school districts can levy taxes of up to 10 mills each.
Millage rates vary in Florida, from just under $10 to $25 per $1,000 taxable real estate value.
To ensure that you are tax-efficient before paying your next property tax bill, speak to a Florida real estate tax accountant today.
What is the Florida property tax rate?
Florida property tax rates vary from state to state.
Local and state governments use various methods to determine and calculate each property tax rate.
The local tax assessor will determine a property value annually by 1st January.
These county appraisers will also review and apply any exemptions, assessment limitations, and relevant classifications to reduce a Florida property’s taxable value.
Florida’s average property tax rate is 0.98%, slightly less than the overall US figure of 1.08%.
The average Florida property owner pays $1,752 annually in property taxes. This will vary between counties.
Several different authorities including counties, municipalities, school boards and special districts can levy these taxes in Florida. Property taxes are all implemented in millage rates.
To discuss the level of tax liability on your Florida real estate, book a call with one of our property tax accountants today.
Are there any property tax exemptions in Florida?
Several property tax exemptions in Florida will reduce your tax bill if you are eligible.
Exemptions include up to $50,000 for a Homestead Exemption, as well as exemptions for senior citizens over the age of 65 and for the disabled.
US veterans can qualify for four different exemptions, whilst widows and widowers are entitled to a $500 exemption. This is providing they haven’t remarried and they weren’t divorced at the time of their ex-spouse’s death.
Homeowners in Florida who are registered as blind are also entitled to a $500 real estate tax exemption.
Other exemptions are available on real estate taxes in Florida for those in active military duty, and the surviving spouses of first responders.
The most commonly used of these is a Homestead Exemption.
If you own a property and make it a permanent residence for you or your dependents, you may be liable to claim for Homestead Exemption.
This can decrease the taxable value of a property in Florida by up to $50,000 depending on the specifics of each property.
On a property in Florida that has an assessed value of $100,000, the first $25,000 is exempt from all real estate taxes.
The next $25,000 can be taxed. The third $25,000 of the assessed property value will be exempt from non-school tax.
The final $25,000 remains taxable, meaning that the property will be taxed completely at a value of $50,000 and that an additional $25,000 of the property value will only be partially taxed in Florida.
To find out how you can minimise your property tax bill in Florida, speak to our property tax accountants today.
What taxes are paid when selling property in Florida?
The most important tax to be aware of when selling property in Florida is Capital Gains Tax.
Capital gains are classed as the profits made as a result of a real estate sale. The difference between the price paid and the final selling price of the property.
The amount of capital gains tax due to be paid in Florida is dependant on various conditions.
These include the condition of the property and if the buyer is a legal US resident.
The good news is that there are various tax deductions available on capital gains tax rates in Florida, including the fees paid for the original loan application, closing costs, and points paid back on a loan to get lower mortgage rates.
Capital gains taxes in Florida are usually around 15%, reaching a high of 20%.
There are reductions available. If the property was the seller’s primary residence for two of the previous five years (called the 2 of 5 Rule) then capital gains are limited to $250,000 for an individual and $500,000 for a married couple.
Capital gains taxes can be reported too under Schedule D of your IRS form.
If a property has been owned for 12 months or less, it must be reported by the owner as a short-term capital gain.
For real estate in Florida, capital gains are based on what was paid for the property against its adjusted cost basis.
These adjustments include purchase and improvement costs.
Take the property’s property’s purchase price and additional costs of purchase, which include transfer fees, legal fees, and inspection costs.
Add the costs of sale, such as inspections, legal fees, real estate commission and money spent to get the property ready for sale.
Finally add costs of improvements, including room additions, new decking, a pool. This cannot include repairs such as a new roof.
The total of the items above is the adjusted cost basis of your Florida property.
Then subtract this adjusted cost from the amount received when selling your real estate to establish the total amount of your capital gain on the property sale. This is a simple but useful analysis.
It is important to speak to an expert property tax adviser in Florida to review your specific situation.
From a tax perspective, US residents are required to report worldwide income to the IRS, while non-residents are only required to report US-based income.
A non-US citizen can be taxed as a US resident under The 183 Day Rule.
If you have been in the US for 183 days or more in any given calendar year, you will be treated as a tax resident by the IRS.
This becomes an important consideration if you are looking to sell real estate in Florida.
Our US tax accountants have written a detailed article on IRS capital gains tax which will be helpful.
It is also worth finding out about selling a US-based asset and FIRPTA at the same time.
How can I avoid paying property taxes in Florida?
There are some ways in which you can avoid paying property taxes in Florida.
One of the first steps is to look at IRS information on tax-deductible items you can claim against.
It is also worth looking at real estate information. Florida requires all counties to keep records of properties. This includes land values, property sketches and sales information. All can impact tax assessment values. Review your property card and check for errors or omissions which need to be resolved.
It is also worth gaining a copy of the property tax card from the county assessor and checking that for any errors.
Log onto your local county records website and research property information for real estate similar to yours in age and size. This will help to establish if your property taxes have been accurately assessed.
Getting a property appraisal completed by an independent contractor is a good way to confirm an official assessment.
An independent appraisal can highlight errors from a mass appraisal approach for tax purposes.
Get a property tax expert to review the paperwork for you and coordinate an appeal if necessary.
Research on available tax reductions available in your Florida county. Tax exemptions vary state by state but Florida offers tax reductions for the Homestead Exemption, active military duty, war veterans, seniors aged 65 or over and the surviving spouses of first responders.
How does this affect our American readers?
Many British people either want a holiday home, an investment, or a house to live in that is based in Florida. However, there are many tax implications of such an investment. For one, you may need to pay US tax to the IRS whilst potentially pang tax in the UK to HMRC if you choose to remain in the UK.
To learn more, make sure you head over to our sister company Purser Tax that helps British people save tax in the US and Americans save tax in the UK.
It is one thing to be tax-efficient in the UK or the US; it is another thing to be tax-efficient across the Atlantic.
This is why you need to get a tax advisor that truly understands international tax.