Florida Homeowners Brace for Significant Property Tax Increases

The vibrant Florida real estate market has brought excitement for many buyers, yet it also comes with unexpected financial consequences. Homeowners like Rick Nociti, who recently purchased a yellow house in Belleair Beach, are discovering that their property tax bills may surge dramatically.

A Surprising Tax Bill for New Homeowners

When Rick and his wife, Meri, closed on their home in July, they anticipated a property tax bill of around $4,000 for that year. However, what they did not foresee was that their taxes would double in the following year. Nociti remarked, “It is a drastic jump.” This experience is not uncommon, as many Florida homeowners who bought properties this year face similar situations.

Understanding Florida’s Property Tax Framework

In Florida, property taxes are based on the current market value of the home, which can fluctuate dramatically in a hot market. Key facts include:

• Market Reset Upon Sale: When a home changes ownership, particularly when the buyer does not have an existing homestead exemption, property taxes reset to reflect the current market value on January 1 of the following year.
• "Save Our Homes" Benefit: For homeowners with a Florida homestead exemption, annual tax increases are capped at 3%. However, this cap is lost when a property is sold, leading to potential spikes in tax obligations.

Nociti wishes that home-search websites would better clarify how tax histories may not represent future bills for new owners. He stated, “It certainly would have … been nice to know.”

Escalating Property Values Across Florida

The Tampa Bay area is experiencing a surge in property values, with notable increases:

• In Hillsborough County, the median increase for single-family homes is 12%.
• Pinellas County reports an increase of 11%.

The total projected property tax collection for Pinellas, Hillsborough, and Pasco counties for 2021 is nearly $4.9 billion, marking the highest in their history.

The Impact of Strong Market Trends

From 2020 to 2021, the Pasco Tax Collector’s Office estimates an increase in property tax collections by approximately $76.7 million, demonstrating the ongoing boom in the housing market.

• Median Home Prices:
  • Pasco County: $325,000
  • Pinellas County: $369,450
  • Hillsborough County: $357,900

These numbers reflect double-digit percentage increases compared to last year, creating significant financial challenges for new homeowners.

Proactive Measures for Homebuyers

Many real estate professionals and local appraisers are working to educate potential buyers about future property tax obligations. Helpful resources include:

• Online Tax Calculators: Many counties provide tools to estimate future tax bills.
• Awareness Campaigns: Local property appraisers emphasize the importance of understanding potential tax increases.

In Pinellas County, for example, the online calculator is utilized over 10,000 times per month.

Tax Surprises

Despite these efforts, many homeowners remain oblivious to the financial realities. In some instances, new buyers find their property taxes to be four to seven times higher than those of previous owners, which typically occurs when properties in desirable locations haven’t changed hands in many years.

Financial Strain on Homeowners

The increasing property taxes are compounded by rising insurance premiums, creating additional strain on homeowners.

• Insurance Premium Hikes: Homeowners’ insurance premiums, which used to see increases of 3-5% yearly, are now rising by 20-30%, with some facing even steeper hikes.
• Affordable Housing Crisis: As costs soar, maintaining affordability becomes challenging, particularly for low- and middle-income families. Experts predict that homeownership rates may decline.

Renters Feeling the Pinch

Landlords are not immune to rising costs. With increasing expenses for insurance and materials, many property owners are compelled to raise rents. As Shawn Rupp, managing director at Colliers International, explains, “Unfortunately, it’s just the case of how it is living in Florida now.”

Conclusion

Navigating the complexities of homeownership in the Florida real estate market is increasingly challenging. With skyrocketing property values, rising taxes, and mounting insurance costs, buyers are urged to remain vigilant and informed to avoid unpleasant surprises. Being proactive and utilizing available resources can help mitigate some of these unexpected financial burdens.

For more information on Florida property taxes, visit the Florida Department of Revenue’s property tax page here.