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The Florida homestead exemption

I was at a family dinner over the weekend and the topic of the Florida homestead exemption came up. The Florida Constitution bestows a number of advantages upon homeowners (provided the home is that person’s primary residence). And like all rules, it impacts behaviors.

For one, your primary residence is largely protected from creditors, meaning a sale generally can’t be forced in order to pay back what you might owe. If you’re out there in the world “betting the farm,” this might be a way to protect yourself.

There are also a number of property tax benefits. You can reduce your assessed value by certain specified amounts, and any increases are (I think) capped at the lesser of 3% or the rate of inflation. (Related post: California’s Proposition 13.)

As we’ve talked about before on the blog, this second exemption likely creates a disincentive for longtime homeowners to sell/move, as even a lateral move would result in possibly much higher taxes. So why move unless you really have to?

The counter argument is that it helps fixed income retirees not get squeezed by rising taxes (and that’s an important consideration in Florida). But it also means that first-time/younger buyers end up shouldering more of the property tax burden — at least initially.

If any of you have strong opinions about the Florida homestead exemption, I would be interested in hearing from you in the comment section below. I am not a lawyer or a tax expert. So please don’t consider this post as any sort of advice.

2 Comments

  1. sheena sharp

    i would love to know if the cost of moving in Toronto, i.e. real easte transaction cost and Land transfer tax increase car traffic because people do not move home if tey move job location.

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  2. Scott Baker

    Prop 13 in California (and similar legislation elsewhere) has been responsible for gutting the main source of local revenues, diminishing schools (few people remember that CA used to be near the top in educational quality. It is now near the bottom outside the private school system). It has also resulted in hoarding of not only houses, but land, and lack of opportunity for development of new housing.
    The ideal solution is to tax the land only, and not the improvements upon it – e.g. buildings. Then you get less hoarding and speculation, and more buildings. This is the Land Value Tax and it has been proven hundreds of times where it has been allowed to be applied. Of course, people being greedy and short-sighted, that is not often.

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