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Using Florida’s Homestead Exemption to Reduce Your Property Taxes and Protect Your Property From Creditors
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Using Florida’s Homestead Exemption to Reduce Your Property Taxes and Protect Your Property From Creditors

June 29, 2021 Real Estate Development, Sales and Leasing Industry Legal Blog

Reading Time: 6 minutes


In the mid-1880s, the U.S. Government was searching for a way to encourage westward expansion.  To achieve its goal, Congress passed the Homestead Act of 1862 which rewarded individuals brave enough to head west by allowing them to claim up to 160 acres of land as their own homestead. Many individuals took advantage of the Homestead Act, but the Act lost steam and was formally repealed in 1976.

As the federal homesteading frenzy slowed, Florida adopted the Homestead Exemption Amendment to the Florida Constitution. The Homestead Exemption, originally found in Article X, Section 7, can now be found in Article X, Section 4 of the Florida Constitution. Currently, Florida residents can register their primary residence as a homestead under the Homestead Exemption and receive asset protection from creditors and up to $50,000 in property tax exemptions. Florida’s Homestead Exemption covers up to 160 acres of real property located outside of a municipality or up to one-half acre of real property located within a municipality. Fla. Const. Art. X, § 4.

This article will provide an overview of the benefits of Florida’s Homestead Exemption as well as the Homestead Exemption eligibility requirements and application process.

homestead exemption property tax exemption florida homestead reduce property taxes florida real estate

Protection from Creditors under the Homestead Exemption

Registering your property as a homestead will protect it from claims made by judgment creditors. Article X, Section 4 of Florida’s Constitution states that “no judgment, decree or execution shall be a lien” upon a homestead. Therefore, judgment creditors to whom you owe a debt cannot record a lien against your homestead. Courts cannot force a sale of your homestead to pay the judgment.  Florida courts are protective of the homestead and construe the protections of the Homestead Exemption broadly and exceptions to the exemption narrowly. In fact, the Florida Supreme Court has held that the Homestead Exemption “protects the homestead against every type of claim and judgment except those specifically mentioned in the constitutional provision.” Osborne v. Dumoulin, 55 So. 3d 577 (Fla. 2011) (citing Olesky v. Nicholas, 82 So. 2d 510, 513 (Fla. 1955)).

As discussed by the Florida Supreme Court, there are three types of liens that fall outside of the Homestead Exemption. Failure to pay the following obligations can result in a lien being placed on your property even if you have registered it as your homestead:

  • Property Taxes & Assessments;
  • Obligations contracted for the purchase, improvement or repair of your homestead; and
  • Obligations contracted for house, field, or other labor performed on the homestead.

Fla. Const. Art., § 4.

Unless you owe a creditor for a debt arising out of the three situations above, your homestead will not be subject to liens or other claims from creditors.

Florida Homestead Exemption from Property Taxes

Florida homesteads are not only provided constitutional protection from creditors, but also statutory protection from taxation. Under Chapter 196, Florida Statutes, Florida homeowners can claim up to a $50,000 in property tax exemptions. Fla. Stat. § 196.031. Property tax exemptions under Florida’s Homestead Exemption are determined using a tiered system based on the assessed value of an individual’s homestead. Under the tiered system, homeowners are able to claim an initial $25,000 exemption for the first $25,000 of their homestead’s assessed value, and an additional $25,000 for their homestead’s assessed value over $50,000. Flat. Stat. § 196.031.

For example:

  • If your homestead’s assessed value is between $0 and $25,000, you can claim up to $25,000 in exemptions that can be used against both property taxes and school-based taxes.
  • If your homestead’s assessed value is between $25,001 and $50,000 you can still claim up to $25,000 dollars in exemptions.
  • If your homestead’s assessed value is greater than $50,000, you can claim the initial $25,000 against property and school-based taxes and an additional $25,000 against property taxes only.

The property tax exemption is made against the assessed value of your homestead. This means that if your homestead is assessed at a value of $100,000, you will only pay taxes as though your homestead is worth $50,000. This reduction in value is used only for purposes of calculating the amount of taxes you will owe on your homestead. The actual fair market value of your property is unaffected by registering it as a homestead.

Homestead Exemption Eligibility

In order to be eligible for Florida’s Homestead Exemption, you and your property will have to meet a few requirements. First, you must be a natural person. Business entities, even those that may be considered “persons” under the law for other purposes, are generally not eligible to register their property under the Homestead Exemption. The Homestead Exemption also applies to your dependents, such as your spouse or children, even if you own the property jointly or by the entirety. Fla. Stat. § 196.031. If you and your spouse own the property together, you both must fill out the Homestead Exemption application. Second, you must own the property as of January 1 of your application year and intend to keep it as your primary permanent residence, as defined by Section 196.012(17), Florida Statutes.

Homestead Exemption Application Process

In order to take advantage of the Florida’s Homestead Exemption, you will need to file an application, using Form DR501, with the Florida Department of Revenue. Filing an application can be done through your county property appraiser. Make sure you check your county property appraiser’s website for information on the application due date for your application cycle. If you fail to submit your application by the relevant due date, you make have to pay extra fees for a late application or wait until the following year to apply for your exemption.

To file your application for the Homestead Exemption, you will need the following information:

  • Name
  • Address
  • Social Security Number
  • Proof of Residency
  • Proof of Ownership
  • Vehicle Registration Information

Fla. Stat. § 196.015.

Once your application for the Homestead Exception has been approved, you will continue to receive the benefits of the exemption so long as you continue to meet the eligibility requirements. Certain acts, such as renting out your home for an extended period of time, moving away, or failing to pay your property taxes make you ineligible for the Homestead Exemption. However, Florida provides additional exemptions from the abandonment rules for active duty servicemembers in the military. Fla. Stat. § 196.061.

In addition to the normal Homestead Exemption, Florida offers additional exemptions for those who fall into the following groups:

Conclusion

Florida created an incredible opportunity for homeowners when it adopted the Homestead Exemption Amendment. By filing an application to register your primary permanent residence as a homestead, you can protect your property from creditors and reduce the property taxes you owe each year without reducing the value of your home.


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