Thanks to its gorgeous beaches, diverse food and entertainment scene, and year-round sunny weather, Florida attracts countless new residents each year. But, before buying a home here, it is imperative to understand the tax implications. Here is what you need to know about property tax in Florida.
Do Homeowners Pay Property Tax in Florida?
Florida is known for having no state income tax, which is one of the many qualities that make it so desirable. One thing that a lot of potential homeowners want to know, though, is whether or not they will need to pay taxes on their property. So, does Florida have property taxes?
Yes, in Florida, you do need to pay property taxes. This is the form of tax that is assessed based on the taxable value of a property or home. These property taxes are allocated toward the budget for infrastructure, public schools, libraries, and roads. Government entities, schools, and churches, though, do not have to pay property taxes.
It is worth noting that there is no state property tax in Florida. Owners pay the tax to their local municipality, which is also the entity responsible for setting the tax rate. The Florida Department of Revenue is responsible for overseeing local municipalities and counties.
The Cycle of Property Tax in Florida
Here is a short guide to how Florida determines and collects property taxes.
The first step is determining a property tax base through appraisals. Property appraisers are in charge of doing this for their counties on a yearly basis. The appraisers then apply all the valid assessment limitations, classifications, and exemptions. This will allow them to arrive at the taxable value of each property.
The Florida Department of Revenue is responsible for reviewing the property tax roll of each county, ensuring that it conforms with the state’s tax law. The same department is also in charge of approving the annual budget of every property appraiser.
You can search for property appraisers in your area here.
2. Florida Property Tax Rate
While property appraisers determine the property tax base, they do not determine the property tax rate. That job rests with locally elected officials. Local governments set a millage or tax rate for the upcoming fiscal year. This rate applies to all property types equally.
The Florida Department of Revenue oversees this step as well. The department makes sure that local government tax rates don’t go over the caps stipulated by law.
3. Notice of TRIM
TRIM stands for Truth-in-Millage. During this step, property appraisers send a Notice of Proposed Property Taxes (also known as a TRIM notice) to each property owner. The notice consists of the property’s value as of January 1 as well as the millage rate set by the local government. This also contains the estimated property taxes that the property owners must pay.
Keep in mind that the millage rate in this notice is only the proposed rate. Property owners have an opportunity to comment on the millage rates at the local government’s budget hearing. The notice should also contain the details of the budget hearing.
The Value Adjustment Boards then come in. These boards, consisting of five members each, are in charge of hearing and ruling on objections to the property’s assessment, exemptions, and classifications. The Value Adjustment Board works independently from property appraisers and tax collectors. While boards rule on objections, they have no power to change the property tax rate.
You can search for value adjustment boards here.
5. Billing and Payment
Property owners will then receive annual property tax bills from tax collectors. This usually happens in late October or early November. Owners have until March 31 of the following year to settle their full payment. Those who pay early can take advantage of discounts of up to 4%.
To calculate your property taxes, simply follow the equations below:
Just Value – Assessment Limits = Assessed Value
Assessed Value – Exemptions = Taxable Value
Taxable Value x Millage Rate = Total Tax Liability
You can search for tax collectors in your area here.
6. Collections and Refunds
Once the March 31st deadline comes and goes, tax collectors sell a tax certificate on properties that haven’t paid property taxes. This certificate is used to collect unpaid taxes. A tax deed may also be sold if the taxpayer fails to settle all back taxes, fees, and interests within 2 years. Other than collecting taxes, tax collectors also process refunds in case of overpayment.
Finally, public education and local services benefit from the property taxes that owners pay. In Florida, about 50% of public education’s funding and 30% of local government funding stem from property taxes.
Florida Capital Gains Tax on Real Estate
Property tax is the tax you pay each year based on the value of your home. But, what if you decide to sell your home? Do you have to pay a tax along with the sale?
One of the real estate taxes in Florida that you must know about is called the capital gains tax. This is the tax you might need to pay on the profit from the sale of a property. To compute for profit, you deduct expenses from revenue, and revenue is the sale price minus the purchase price. Upon the sale of a property, you must file a tax return with the Internal Revenue Service.
Rental Property Tax in Florida
If own a rental property, another Florida real estate tax you have to think about is the tax on rental income. Rental property owners earn rental income from tenants. If that results in a net profit, a federal tax rate may apply.
Additionally, short-term rentals are subject to a 6%sales tax in Florida. The state defines short-term rentals as rental periods that are 6 months or less. Typically, renters pay for this sales tax, which is then paid to the local government.
The Value of Professional Help
It is not always easy to understand the cycle of property tax in Florida. Moreover, if you own a rental property, you will likely need to pay additional tax on rental income as well. As such, it is best to hire an experienced accountant to help you out. Alternatively, you can hire a property management company to do everything for you.
Look for a property management company in your area today. Start browsing using Florida Property Management’s online directory!