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Florida House & Senate Pass Property TAX-REFORM Plan...

With overwhelming bi-partisan support, the Florida House & Senate passed an improved property tax reform plan yesterday that is expected to provide over $12 billion in tax relief during the next 5 years.

Our early understanding of the major benefits of the bill are as follows:
* The homestead exemption is doubled from $25,000 to $50,000, although the second $25,000
exemption will not reduce local school tax collections.
* Preserves the Save Our Homes (SOH) Cap of 3% and provides for Save Our Homes
Portability. Permits a homesteader moving to a higher priced home (higher than the value of
their current home based on the tax appraiser’s “Just Value Assessment”) to take all of his
SOH savings up to a maximum of $500,000.

For homesteaders moving to a less expensive home, the plan would allow them to take a portion of their SOH savings. See below for an explanation and examples of the formula to be used to determine the amount of SOH savings that would be applied to the new residence.
The portability provision of the bill would be retroactive to January 1, 2007 and therefore would cover any homesteader who purchased another residence in 2007 for a total of 2 years. Jan 1, 2007 to Jan 1, 2009.

* Approves a controversial proposal from the House that provides an assessment cap similar to
the “Save Our Homes,” Cap, to second home owners-non-homestead and commercial
properties. The cap is set at 10% and represents a huge precedent for a state to provide tax
assessment caps for second home, investment and commercial property owners.

This non-homestead cap of 10% for second home purchasers, and investors will represent a substantial savings if buyers move quickly to take advantage and lock in the low prices we now see in today’s market.
* The plan also includes a $25,000 exemption for the taxes businesses pay on equipment and
other personal property.

SAVE OUR HOMES PORTABILITY FORMULA AND EXAMPLES...
If the homesteader is purchasing a home that carries a just value greater than or equal to the just value of the prior homestead, the assessed value of the new homestead shall be the just value of the new homestead minus an amount equal to the lesser of $500,000 or the difference between the just value and the assessed value of the prior homestead.

A Current Homesteader Who Purchases a Home that Exceeds the Just Value of His Current Home Current Homestead
(A) Current Just Value of his property is $500,000
(B) Has a Save Our Home (SOH) savings of - $200,000
(C) Pays taxes on the remaining assessed value of =$300,000
Newly Purchased Homestead
(D) Just value of the new property is $800,000
(E) Minus the $200,000 SOH savings above -$200,000
(F) Equals the assessed value of the new homestead $600,000

The maximum amount of SOH savings that this homeowner can take with them is the lesser of $200,000 or $500,000 and therefore the $200,000 would apply.
A Current Homesteader Who Purchases a Home that is Less than the Just Value of His Current Home Current Homestead
(G) Current Just Value of his property is $600,000
(H) Has a Save Our Homes (SOH) savings on his -$300,000 current homestead of 50%
(I) Equals the adjusted assessed value of $300,000
Newly Purchased Homestead with a just value of $400,000 The assessed value of the new homestead shall be equal to (J) the just value of the new homestead divided by the (K) just value of the prior homestead and multiplied by (L) the assessed value of the prior homestead. ie:
(J) Just Value of the New Property $400,000
(K) Just Value of the Prior Homestead above (G) $600,000
(L) Assessed Value of the Prior Homestead above (I) $300,000
(J) divided by (K) multiplied by (L) = the assessed value of the new homestead
$400,000 divided by $600,000 multiplied by $300,000 equals approximately $200,000, the
amount the new property will be assessed for.

However, if the difference between the just value of the new homestead and the assessed value of the new homestead calculated is greater than $500,000, the assessed value of the new homestead shall be increased so that the difference between the just value and the assessed value does not exceed $500,000. ie:
(M) $1,000.000 Just Value of the new homestead
(N) $ 400,000 Assessed Value of the new homestead
(After applying the above mentioned formula above)

The difference between the just value of $1 Million dollars and the value of the new assessment of $400,000 is $600,000. This exceeds the permitted maximum of $500,000 and therefore the $400,000 assessment on the new homestead would be raised to $500,000.
Although the final plan was not as ambitious as what the House proposed, it provides great benefits to owners of primary, second homes, investment and commercial properties.
MOST IMPORTANTLY, the cap on second home and investment property assessments represent a unique opportunity for buyers to lock in substantial tax savings based on the historically low prices we see today. This record setting property tax plan should be vigorously supported by all as it has substantial benefits for all property owners. This proposal will be included on the Presidential ballot of Jan. 29, 2008, when voters go to the polls.

I hope that this helps to provide you with an overall outline as to how the Tax-Reform Plan stands as of today... Please feel free to contact me with any questions you may have by e-mail or by cell at 239.404.7787...
Have a GREAT day!
Michelle
Prudential Florida WCI Realty
Michelle@NaplesHomeSweetHome.com
Cellular Phone 239.404.7787
www.MichelleDeNomme.com
Michelle DeNomme, REALTOR