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Taxes are bleeding the property gain increases out of the homeowners pockets into the pockets of the taxing authorities.  What can be done?

Recently I attended BankUnited’s seminar on Minimizing Your Property Tax.  Broward County’s Property Appraiser, Lori Parrish was one of the main speakers, and she helped explain to the group that there are several proposals on the table that are attempting to change all that.

Here are some of them:

• Lori Parrish supports adopting a new constitutional PORTABILITY Amendment allowing homestead owners to move their sheltered, Save Our Homes (SOH), value from one primary residence to the next one in the same county under a governmental “local option”.   This can be pretty confusing so I have tried to come up with a real world example to help explain the impact of this proposed change.   
  • Assumptions:
    • You have a home that has a current market value of $300,000
    • Because of the current law the assessed value can only increase a small amount per year which (for this example) the current assessed value is $175,000.  This would mean that the “sheltered amount” (aka SOH) is $125,000(which includes a homestead exemption of $25,000).
    • Taxes run about 2% of the assessed value so the current taxes are about $3500
  • With Portability:
    • You sell the home and buy a $500,000 home
    • New purchases are assessed at about 85% of the market Value, which would be $425,000
    • You would “Move” the SOH to the new home reducing the assessed value to $300,000
    • At the same 2% tax rate, taxes on this new home would be about $6000, a $2500 increase in taxes, that’s about $200/ month additional
  • WITHOUT PORTABILITY
    • You sell the home and buy a $500,000 home
    • New purchases are assessed at about 85% of the market Value, which would be $425,000
    • You would get the “Homestead Exemption” of $25,000, reducing the assessed value to $400,000
    • At the same 2% tax rate, taxes on this new home would be about $8000, a WHOPPING $4500 increase, that’s almost $400/month additional

  In this example you would end up paying $2000/ year less in taxes.  This would also work to the advantage of those wishing to downsize, and in those cases they would pay substantially less taxes or, in some cases, NO TAX AT ALL.  This will make it much easier for people to scale up or down instead of being stuck in their present homes.  

• Some other ideas kicked around: increase the sales tax by 2.5 cents, then substantially reduce or eliminate property taxes altogether.
• Another idea is to use 2001 as the tax base year, before the huge increase in homes values.
• My husband’s idea is to reduce the millage rate to a point where the taxing authorities are getting the same income as they did in 2001(plus annual cost of living adjustments)

We already voted for doubling the Seniors’ Homestead exemption from $25,000 of assessed value to $50,000 of assessed value.

The BOTTOM LINE! Lori Parrish‘s LOUDEST plea, is for us to take action and attend our local city meetings and make our voices heard.  She said, and I agree, we must go and attend even the school board meetings because they impact the city budgets for which we pay taxes.

She also explained that ONLY in even numbered years can we vote for tax changes. So we can vote Sept. 2007 but it’ll have no impact until Nov. 2008. It is not retro active, our taxes are paid in arrears. Which means at least another year and a half of “Pain in the Wallet”.