Florida’s real estate market is undergoing significant shifts due to recent legislative changes and proposals aimed at altering the tax landscape. Governor Ron DeSantis has championed the elimination of property taxes, a move that has sparked debate among industry experts regarding its potential economic impacts and funding implications for essential services.
Property Tax Reform and Debate
Governor DeSantis has proposed eliminating property taxes entirely by March 2025, a move intended to make Florida a "free state" with no state income or property tax. This proposal, which requires voter approval in 2026, has been met with mixed reactions. While some see it as a major draw for new residents and a boon for real estate sales, others express concern about the substantial revenue loss for local governments. Property taxes currently generate billions annually, funding critical services like education, public safety, and infrastructure. Experts suggest that to compensate, sales taxes might need to double, or alternative revenue streams, such as an "entry tax" for new residents, would be necessary.
- Potential Impact: Elimination of property taxes could attract more buyers, but requires careful consideration of revenue replacement.
- Expert Opinions: Some real estate professionals believe lower taxes are beneficial if implemented responsibly, while others caution against the financial implications for municipalities.
Homestead Exemption Enhancements
Floridians have approved a measure to increase their property tax break by tying the homestead exemption to the annual national inflation rate. Starting in 2025, this amendment will adjust the exemption amount based on the Consumer Price Index (CPI), potentially offering greater relief as inflation rises. This change is seen as a victory for property owners, though some critics argue it may disproportionately benefit higher-value properties and could still lead to revenue shortfalls for local governments.
Repeal of Commercial Lease Sales Tax
Effective October 1, 2025, Florida has repealed the sales tax on commercial real estate leases, a move hailed as a significant win for businesses. This repeal also extends to local discretionary sales surtaxes on these leases. While this change is expected to save businesses over $900 million, it does not apply to all leases, excluding short-term residential rentals, parking facilities, and aircraft hangar rentals, among others. Businesses are advised to review their leases and update accounting practices to comply with the new regulations.
Other Legislative Changes
The recent legislative session also introduced several other measures impacting the real estate sector. These include a $50 million allocation for down-payment assistance programs for essential workers, a $280 million boost to the My Safe Florida Home Program for storm mitigation, and new legislation to expedite the removal of unlawful occupants (squatters). Additionally, new requirements for flood risk disclosures for long-term renters and increased transparency regarding mobile home park lot conditions have been implemented. However, some lawmakers argue that these measures do not sufficiently address the ongoing crises of housing affordability and high property insurance costs.
Sources
- DeSantis’ property tax elimination plan could make Florida a buyer’s paradise, Fox Business.
- Florida Repeals Sales Tax on Commercial Leases: 5 Things to Know Now | Lowndes, JD Supra.
- New Florida real estate laws hailed as ‘major victory’ for property owners, MPA Mag.
- Florida: Your Property Tax Break Could Get Slightly Better in 2025, Kiplinger.