Homeowners may soon start to realize the impact of rising property values on their property taxes. For perspective, the average national increases in property taxes for 2020 was 4%. With this said, many experts are predicting property taxes to increase by another 6.5% for 2021. Property taxes are collected by local city governments to help pay for services like fire, police, and schools. Jurisdictions follow different timetables of when they reassess home values and update bills. Therefore, the timing of these increases may differ from city to city.
Offsetting revenue losses from 2020
Another factor contributing to rising property taxes for 2021 is the fact that many city governments have lost revenue during the COVID-19 pandemic. Needless to say, it is expected that many jurisdictions will look to increased property tax revenues to fill this void. Furthermore, with many commercial buildings becoming vacant during the pandemic, this has resulted in less commercial property tax revenues. Thus this will shift more of the property tax burden onto residential properties.
Homestead Exemption
About 34 states restrict how much taxes can increase in a single year, providing some level of protection to homeowners. In the state of Florida, homeowners may apply for the Homestead Exemption for their primary residence. With this program, a $25,000 exemption is applied to the first $50,000 of your property’s assessed value if your property is your permanent residence and you owned the property on January 1 of the tax year. This exemption applies to all taxes, including school district taxes. An additional exemption of up to $25,000 will be applied if your property’s assessed value is between at least $50,000 and $75,000. This exemption is not applied to school district taxes. The Homestead Exemption also qualifies you for the 3% “Save our Homes” (SOH) Cap. The 3% SOH Cap limits any increase to the assessed value of a homestead exempt property for tax purposes to a maximum of 3% each year or the amount of the change in the Consumer Price Index, whichever is lower.All homestead exemption applications must be submitted by March 1.
Summary
Although homeowners should be grateful for rising property values, it is also important that they budget accordingly in anticipation of rising property taxes. As described above, it is imperative that you file for your Homestead Exemption in the state of Florida if this is your permanent residence. For other properties that may not be homesteaded such as rental properties, it is important that you take these additional costs into account for budgeting purposes. Oftentimes, this will likely result in rental price increases to help offset these additional costs.
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