Real Estate Taxes 101
Tax season has recently come to a close, and raises the conversation about how buying, owning and/or selling South Florida real estate can impact one’s overall tax obligations. Our real estate professionals always want to ensure our clients are well informed about everything that comes with buying or selling a home. That’s why we’re sharing an overview of real estate taxes in Florida, as well as some key considerations for the filing process.
Taxes After Buying a Home
Florida’s lack of a personal income tax makes the state an attractive location for purchasing a home and maintaining a primary residence, along with its tropical climate, of course. However, there are still property taxes to consider. Property taxes in the Sunshine State vary based on location and the home’s taxable value. The latter is determined through a yearly assessment done by the location count’s property tax assessor, which can change from one year to the next. That said, the state’s Save Our Homes cap ensures any increases do not exceed 3 percent of the previous year’s assessment, provided the home has been registered as the homestead residence under Florida’s homestead laws. These homeowners are also eligible for a homestead exemption that reduces the property’s assessed taxable value. For homes with taxable values that exceed $75,000, up to $50,000 is eligible to be exempted from the property’s overall taxable value There may be other applicable exemptions available as well, so we always recommend that our clients consult an accountant and/or a real estate professional to discuss potential savings opportunities.
Property taxes are paid to the local municipality and are based on the property’s assessed value multiplied by the municipality’s millage rate. This amount is a deductible expense when filing an annual tax return. Interest paid on one’s home mortgage is also deductible and is noted on the homeowner’s Form 1098.
Taxes After Selling a Home
For those selling South Florida real estate, Florida’s capital gains tax is important to understand. This tax is paid to the federal government and is typically reserved for investment properties and secondary residences. Only the seller’s profit on the transaction is taxable, which is calculated by subtracting the original purchase price, the cost of the sale and any added expenses from the closing price. Sellers can save on these taxes by keeping careful records of all expenses tied to the sale of the property, including but not limited to, travel costs for showings and staging fees.
When an individual is selling his or her primary residence, the full profit is usually exempted from the capital gains tax. Federal law allows an exemption of up to $250,000 for single filers and up to $500,000 for married couples filing taxes jointly, provided the seller has lived in the home for at least two of the last five years. Aside from the capital gains tax, a home seller will also likely have to pay a documentary stamp tax to transfer the deed. Get Additional Guidance
If you have additional questions about real estate taxes in Florida or you’re simply looking for guidance on the home buying or selling process, our team is here for you. Contact our office today to schedule a meeting with one of our real estate rockstars.