When you purchase a home in Miami, you can expect to pay running annual property taxes of approximately 2% of the purchase price on a go-forward basis. While this sounds exceptionally high and on par with the highest rates of property taxation in the country, there are generous exemptions that can reduce the rate of increase in the years following your purchase.
First, let’s clear up the definitions of some basic terms. In Miami-Dade County, property taxes generally run about 2% of the “Assessed Value” of the property, per year. In Miami, the Assessed Value will equal the “Market Value” of the property unless you have exemptions in place. Any exemptions or caps reduce your Assessed Value, but any such caps or exemptions are removed when a property is sold. Thus, the Assessed Value of a property catches up with its Market Value upon the sale of a property.
If you call the Miami-Dade Property Appraiser’s Officer, they will tell you that Market Value is what the property would have sold for, approximately, in an arms-length transaction on January 1st of the reference tax year. So in essence, the county appraisers do a real estate appraisal, look at comparable transactions and market conditions, and estimate the Market Value of your property just like a private sector real estate appraiser would.
Now if you call up a few tax certiorari lawyers (i.e. lawyers who dispute the Market Value of your property on your behalf, typically for a success based percentage of your tax savings) as we have, they’ll tell you that the Property Appraiser’s Office doesn’t like to be wrong, and in order to play it safe they’ll usually have the Market Value be up to 15% less than what the latest comparable sales might indicate on a price per square foot basis.
We’ve also been told by tax certiorari lawyers that the Property Appraiser’s Office will consider closed sales that happened in the first quarter (Q1) of the reference tax year. Meaning if the 2023 Market Value for a property was $3,568,500 per the below example, then sales that closed as late as March 31st, 2023 will be considered because they realistically would have gone into contract before January 1, 2023.
In the above example, we have a luxury condo unit without any exemptions or caps in place for 2021 or 2022, but a Non-Homestead Cap in place for 2023. As you can see, the Market Value was equal to the Assessed Value for 2021 and 2022 since there were no exemptions or caps.
In 2023 however, the Non-Homestead Cap placed a 10% maximum increase in the Assessed Value. Therefore, you can see that the Market Value increased almost 46% for 2023, but the Assessed Value was capped, and increased only 10%.
Pro Tip: As you can see, the Market Value stayed the same in 2022 vs 2021 which is a bit unusual. This is likely because the unit was still unfinished as of January 1st, 2022 and the fact that the owner purchased the property in November 2021 for only 7.4% more. What would have been most ideal is if the owner received the Homestead Exemption for 2022, in which case he or she would have received the Save Our Homes Cap for 2023, thus limiting increases in the Assessed Value to 3% or CPI, whichever is lower, going forward.
Assessed Value vs Taxable Value
As we’ve established earlier, the Assessed Value is equal to the Market Value unless there are caps in place (i.e. Non-Homestead Cap or the Save Our Homes Cap). Otherwise, assuming that the Market Value is higher, the Assessed Value is simply the prior tax year’s Assessed Value increased by the amount allowed by the applicable cap.
In the below example, you can see that the homeowner received the Homestead Exemption for 2022, which means the Save Our Homes Cap kicked in the following year for 2023. This explains why in 2022, the Assessed Value increased as much as the Market Value, but in 2023 the Assessed Value only increased 3%, while the Market Value increased 22%!
So what is Taxable Value?
Taxable Value is equal to Assessed Value, unless there are exemptions in place which further reduce the Taxable Value, namely the Homestead Exemption. As you can see in the above example, the Homestead Exemption comes in two parts ($25,000 for Homestead and another $25,000 for Second Homestead). The County, City and Regional portions of your property tax bill take entire Homestead Exemption into account, reducing your Taxable Value by a full $50,000 from your Assessed Value. However, the School Board portion of Miami real estate taxes is only reduced by one Homestead Exemption, or $25,000.
Let’s re-visit our first example of the luxury condo with only a Non-Homestead Cap in place. As you can see below, the Taxable Value is equal to the Assessed Value for the County, City and Regional portions of property tax. However, the Taxable Value for the School Board portion of real estate taxes is entirely uncapped, and equal to the Market Value!
Millage rates will differ every tax year, but expect the School Board portion of property taxes to account for roughly 30-40% of total property taxes. As a result, the Non-Homestead Cap is not so great for investors or simply homeowners who were late or didn’t apply for the Homestead Exemption for whatever reason.
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Generally speaking, the Homestead Exemption and the Save Our Homes Cap is better than the Non-Homestead Cap. After all, a maximum 3% increase is significantly better than a 10% increase (with the School Board portion being uncapped).
With that said, every situation is unique, and investors or second home owners might not qualify for the Homestead Exemption. Furthermore, in the first example we showed, applying late for the Homestead Exemption can have dire consequences.
In the above example, the homeowner purchased the property in November 2021, but was too late to qualify for the Homestead Exemption in 2022 (you must have moved into the property as your primary residence as of January 1st of the applicable tax year). The homeowner instead applied for the Homestead Exemption in 2023 and got it. However, remember that the Save Our Homes Cap only goes into effect with a 1 year lag after the Homestead Exemption is approved. This became a severe problem as the Market Value increased 46% in 2023!
As a result, in this case the homeowner would have been better off simply not applying for the Homestead Exemption at all, because he or she would have automatically received the Non-Homestead Cap (which also goes into effect automatically with a 1 year lag after purchase).
Fortunately, this homeowner was able to drop off a notarized affidavit at the Property Appraiser’s Office to rescind the Homestead Exemption and automatically get the Non-Homestead Cap instead. The Miami-Dade County Property Appraiser’s office is pretty good in this regard, as other county officials might not allow this change. As one lawyer told us, the Miami-Dade County Property Appraiser’s Exemptions Office is more focused on Homestead Exemption fraud.
Pro Tip: Even though the officials will never admit it, the reason there’s a one-year lag before either the Save Our Homes Cap or the Non-Homestead Cap kicks in is to target new homeowners who have recently moved to Florida and purchased at substantially higher prices. It is these newcomers paying property taxes at full, uncapped market values that really pay the bills in Miami-Dade County.
Can you transfer your Save Our Homes Cap to a new property?
Yes, the Save Our Homes Cap is portable to a new primary residence if you decide to move within Florida. You can transfer your accumulated Save Our Homes (SOH) benefit to a new primary residence up to a maximum of $500,000. To port your SOH benefit, first apply for Homestead on your new home using form DR-501. Thereafter, complete Form DR-501T and file it with your property appraiser by March 1.
As you can see, the laws really protect long-time property owners and residents of Florida from drastic increases in property values and assessments. It is the new owners coming in who are hit by assessed values being reset to full market values.
Unfortunately, there is no way to shield yourself from this as the Property Appraiser’s office takes a close look at properties during the gap year after a new Homestead Exemption goes into effect, or when a property is purchased, to make sure the Market Value is properly updated.
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided.