REAL PROPERTY TAXATION
Taxing entities 
/ Ad valorem taxation / Exemptions from property taxes / Homestead exemption / Florida Greenbelt Law / Special assessments
Taxing entities
Real estate taxation refers to the taxation of real estate as property. Real estate property taxes are imposed by “taxing entities” or “taxing districts” at county and local levels of government.
There are no federal taxes on real property. The Constitution of the United States specifically prohibits such taxes. The federal government does, however, tax income derived from real property and gains realized on the sale of real property. The federal government can impose a tax lien against property for failure to pay any tax due the Internal Revenue Service.
State government. States may legally levy taxes on real property, but most delegate this power to counties, cities, townships and local taxing districts. Florida is one such state that passes property taxing on to local governments and tax districts. The state does not use any of the revenue derived from property taxes. Some states place limits on how local governments may levy such taxes. The State of Florida limits millage rates to 10 mills. States may impose a tax lien against property for failure to pay any real property taxes which the state has levied or delegated to local taxing bodies.
County and local government. Counties, cities and municipalities, townships and special tax districts levy taxes on real property to raise funds for providing local services. It is common for the county to collect all real property taxes and distribute it among the other taxing bodies.
Tax districts. County and local governments establish tax districts to collect funds for providing specific services. The boundaries of such districts typically do not coincide with municipal boundaries. The major tax district in most areas is the school district. Other important tax districts are those for fire protection, community colleges, and parks.
A property tax bill might include tax levies from such districts as the following.
| – bridge and highway
– nursing home – storm water management – township – fire district – school district – retirement fund |
– health services
– historical museum – sanitorium – forest preserve/land management – public library district – park district – community college district |
In addition to generally established tax districts, a local government authority may establish a special tax district to pay for the cost of a specific improvement or service that benefits that area. For instance, a special tax district might be created to fund extension of municipal water service to a newly incorporated area. Unlike a permanent tax district such as the school district, a special tax district is temporary, ceasing to exist once the costs of the specific project have been paid for.
Ad valorem taxation General property taxes are levied on an ad valorem basis, meaning that they are based on the assessed value of the property. Assessed value is determined according to state law, usually by a county or township assessor or appraiser. The actual tax, though based on assessed value, may be derived as a legislated percentage of the assessed value. Land and improvements may be assessed separately.
Florida tax schedule. Ad valorem taxes are paid annually. The tax schedule is from January 1 to December 31. In August, the local appraiser sends a Truth in Millage (TRIM) tax notice to homeowners, which includes proposed tax rates and the estimated property taxes for that year. The actual tax bill is sent out in late October.
Property owners can pay the taxes in one payment due on November 1, or they can make installment payments. The following January 1, unpaid taxes become a lien on the property which is superior to any other lien, and any payments made after March 1 must be for the full unpaid balance. On April 1, unpaid taxes for the previous year become delinquent.
Tax base totalling. The tax base of an area is the total of the appraised or assessed values of all real property within the area’s boundaries, excluding partially or totally exempt properties:
tax base = assessed values – exemptions
Taxing entities generate the annual revenues they require by levying taxes on the tax base. The tax rate, or millage rate, determines how much of a tax levy the tax base will receive. The tax rate for each taxing entity is calculated by dividing the amount of revenue required by the tax base. This rate is then applied to the taxable value of each individual real property to determine its tax levy.
Value assessment in Florida. Every county in Florida has an elected property appraiser who is responsible for annual appraisals to value the real property within their jurisdiction for purposes of levying taxes. This valuation process results in an assessed value.
In Florida, state statutes require that property be assessed at just value (market value), using the property’s cash value, location, size, improvements, use, replacement cost, and condition.
The role of the assessor in the taxing process is limited to physically or electronically (using imaging technology) inspecting the property every 5 years, making the valuation, and notifying the owner of the assessed value; other tax officials determine the tax rate and the tax levy.
Protesting assessed value. Property owners may object to the assessed value of their property, but not to the tax rate. An owner has 25 days to protest or appeal after the TRIM notice is mailed. According to local law, a property owner must present evidence that the assessor made an error to a review board or appeal board.
A Florida owner who wishes to protest the assessed value may initiate an appeal or protest by following these three steps:
- Step 1 – the homeowner may contact the property appraiser to seek an adjustment to the assessed value.
- Step 2 – if the appraiser rejects the adjustment request, the owner may file an appeal with the Value Adjustment Board.
- Step 3 – if the Value Adjustment Board rejects the adjustment request, the property owner may pay the taxes under protest and initiate litigation in the courts against the appraiser and the tax collector.
Tax district budgeting. The derivation of a tax rate, or millage rate, begins with the taxing body determining its funding requirements to provide services for the year. This requirement is formalized in the annual budget. Then the county or district looks at its sources of revenue, such as sales taxes, business taxes, income taxes, state and federal grants, fees, and so forth. The part of the budgeted expenditures that cannot be funded from other income sources must come from real property taxes. This budgetary shortfall becomes the ad valorem tax levy. The tax levy is derived every year, since budget requirements and revenue tallies are performed on an annual cycle.
Calculating taxable value. After the county or district develops its annual budget and determines the ad valorem tax levy, it must then consider the total assessed value, known as the tax base, of all taxable property in the county or district. Looking at each property’s assessed value, the next step is to subtract all applicable exemptions from the assessed value, applying the SOH limitations, to determine the taxable value of the property. If no exemptions apply, the taxable value and the assessed value are the same.
Tax rate. Each individual taxing body has its own tax rate. The tax rate is determined by dividing the taxing body’s budgeted amount to be collected from real estate taxes by the tax base:
In Florida, property taxes are collected on a county level, and each county has its own method of assessing and collecting taxes. As a result, no single property tax rate applies uniformly to all properties in Florida.
Calculating property taxes. To determine the actual tax, the taxable value is multiplied by the county’s tax rate. Just as the county’s financial needs and operating budget may change every year, consequently, so may the tax rate.
Tax rate limitations. Some states, counties or other taxing districts place limitations or caps on the absolute millage rate or the annual increase in millage for property taxes. Florida limits millage rates to 10 mills. With a tax cap, taxing bodies are forced to limit their budget requirements, unless there has been a sufficient increase in tax base to produce the required funds without raising the millage rate.
Exemptions from property taxes
Immune property. In Florida, property owned by federal government, state, county, or city governments is 100% immune from ad valorem taxation as long as the property is being used by the government for governmental purposes. For example, federally owned military bases, state municipal buildings, county and city police headquarters, fire stations, and public schools are immune from property taxes. However, when government-owned property is used by a nongovernment entity or person for a nonexempt use, the property is no longer immune from taxes.
Exempt or partially exempt property. Properties in Florida that are owned by churches, church schools, and nonprofit organizations are 100% exempt from property taxation. Properties owned and occupied as homestead properties are partially exempt from taxation through the application of homestead tax exemptions which are deducted from the assessed value of the property before the taxable value is determined.
Homestead exemption
A homestead is a parcel of real property that is owned and occupied as a family home. Some states exempt a portion of the value of the homestead from judgments to protect families against eviction by creditors. States and counties may exempt a portion of the assessed value of the principal residence from property taxation.
Qualified Florida residents may receive a homestead exemption up to $50,000, which is divided into two parts: first is $25,000 for property taxes to include school district taxes, and second is $25,000 dependent on the property’s assessed value between $50,000 and $75,000, not to include school district taxes.
A property owner generally qualifies for a homestead exemption by meeting the following criteria:
- holds title to the homestead
- resides on the property for the entire year starting on January 1
- uses the home as the permanent residence
- apply for the exemption by March 1 to qualify for the same year
Secondary homes do not qualify for the exemption. The homeowner must apply by March 1 for the exemption to apply to that year’s taxes.
Florida does not restrict the exemption to the head of the family as some states do. Instead, Floridaallows a single person to claim the homestead exemption as well.
In Florida, once a homeowner has applied and qualified for an exemption, the exemption is automatically applied every year going forward. The homeowner simply needs to notify the county if his or her homestead has changed so that the exemption is no longer valid.
Assessment limitation (Save Our Homes benefit). The SOH amendment to the Florida constitution keeps property taxes from rising out of control by limiting the increase in the annual assessed value of a homestead to 3% of the previous year’s assessed property value or the percentage of change in the Consumer Price Index for the previous year, whichever is less.
The SOH assessment limitation requires that all property be assessed for tax purposes at its just value. With the limitation, the assessed value cannot exceed the just value of a property. SOH is defined in Florida statute as “the accumulated difference between the assessed value and the just (market) value.” Homeowners must apply for a homestead exemption to receive the SOH benefit.
Surviving spouse exemption. Surviving spouses who have not remarried receive an additional $500 exemption applied to the assessed value of their homestead. The surviving spouse of a first responder within Florida who died in the line of duty is exempt from property taxation.
Disability exemption. Individuals who are quadriplegic or totally and permanently disabled or must use a wheel chair are exempt from all property taxation as long as the gross household income is less than the current gross income limit. Disabled individuals must submit certification of the disability from two Florida doctors or from U.S. Veterans Affairs.
Blind persons exemption. Individuals who are legally blind are also exempt from paying property taxes on their homestead. They too must submit certification of their blindness from either two Florida doctorsor one Florida doctor and one Florida optometrist.
Cumulative homestead tax exemption. Homestead taxpayers may qualify for multiple exemptions, known as cumulative exemptions, that are added together and then subtracted from the homestead’s assessed value.
Military service-connected total and permanent disability tax exemption. Veterans who are Florida residents and were honorably discharged with a service-connected total and permanent disability may qualify for a total property tax exemption on their homestead. This exemption is also available to a military member’s surviving spouse if the member died while on active duty.
Florida Greenbelt Law
Nature. Under Florida’s Greenbelt Law, property assessments for taxation are based on the actual use of the property and not the highest and best use, such as urban growth and development. The result is a lower property assessment and lower taxes for the farmer.
Purpose. Florida’s Green Belt Law was created to protect farmers from having property taxes raised to the point where it no longer would be economically feasible for that farmer to continue the agricultural use.
Provisions. To qualify for the classification and resulting exemption, the farmer must apply before March 1 of the tax year. The land must be used primarily for bona fide agricultural purposes or good faith commercial agricultural use. Further, while Florida does not have a minimum size requirement to qualify, the land must be large enough to support a commercial agricultural operation. Hobby farms and livestock or produce for personal use do not qualify for the exemption. To maintain the agricultural classification and discourage land purchases by speculators and investors, the land is required to be classified every year and reassessed at least every 3 years.
The Greenbelt Law does not require the property owner to reside on the property or be the person who actually performs the work on the property. The owner is allowed to lease the property to other individuals who will maintain the agricultural use and operation. Leased properties still qualify for the exemption as long as the lessee is using the property for the required use.
