Your Home and The Pinellas County Tax Collector
If you are like many Americans you believe that purchasing a home is a sound financial decision. The advantages are many, including equity build up, pride of ownership and the fact that you’re not subject to the whims of a landlord. Each year when you file your income taxes you can write off your itemized Real Estate taxes and mortgage interest which in turn reduces your federal tax burden. Your home is also your “homestead” which saves you money on those county real estate taxes. Most everyone knows that the standard homestead deduction is $50,000. So, if your homes assessed value is $400,000 that $50,000 homestead comes off the top thereby reducing your taxable (assessed value) to $350,000 which saves you about $1,000 per year depending on the municipality you live in.
But the real benefit is the “save our homes cap” (SOH). The SOH cap limits the increase of your homes taxable value each year. The maximum increase in taxable value is limited to 3% or the annual consumer price index (CPI) whichever is lower. (Note CPI for 2019 is on track to be 1.8%). The SOH has been in effect since 1992 when Florida voters approved the amendment to the Florida Constitution to prevent homeowners from being “taxed out” of their homes in an escalating market. For example, assessed values jumped about 25% in Pinellas County in one year alone from 2015 to 2016. ( See below )
Those savings really ad up. SOH accumulates a value differential every year in an escalating market, so while the market value of your home is going up your real estate taxes are kept in check.
When you do decide to sell: the new buyer starts the process from whatever the assessed value without SOH is at the time of the sale. It’s not uncommon for the taxes on a property to increase dramatically after a sale especially if the seller has owned the property for a number of years.
The good news for the seller is that SOH differential is “portable” if the seller buys another home in Florida. The difference in SOH value and Market Value can be transferred to the new home. Stay tuned for the next blog post “ You can take it with you “ for details.