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If you elect to purchase and occupy a personal residence in Florida, as opposed to renting, you may also qualify to establish Florida residency and claim the Florida homestead exemption. In the Sunshine State, the homestead exemption provides two annual financial benefits:
- It reduces the home’s assessed value of property taxes by $50,000, so a home that is worth $500,000 would be taxed as though it is worth only $450,000. It is important to note $25,000 of homestead coverage does not apply to the school portion of property taxes.
- It limits increases in the assessed value of a home to the lesser of three percent or CPI. Further, even if you move and change homesteads in Florida, much (if not all) of the accumulated savings can be transferred to your next Florida homestead. Thus, in an attractive and appreciating housing market, your property taxes may be significantly mitigated over time compared to the housing market.
There are additional benefits available to taxpayers over age 65; however, most apply only to taxpayers with very limited income.
How to Apply For Homestead Exemption
Possibly the most significant homestead benefit is that creditors, in most cases, may not access the homestead for debts. This is true even at death. Combining the foregoing financial benefits with this creditor protection, Florida homestead can be an immensely valuable benefit for Florida residents.
Claiming a Florida homestead exemption involves some very specific requirements that must be completed within a specified time frame and which, of necessity, must be completed in a certain order. Florida law requires a homeowner to own and occupy the residence as of January 1 of the year in which the application is made, although the application may be filed as late as March 1. The forms are available from each County’s Property Appraiser’s Office and may also be found on the internet. When applying, the homeowner must present the following:
- A valid Florida driver’s license or state ID card. If you’re planning to claim a homestead exemption, you must first apply for a Florida driver’s license. A Florida ID Card may be used in lieu of a driver’s license if the homeowner does not have a driver’s license. Florida will recognize a Michigan driver’s license as justification for issuing a new Florida driver’s license without an exam or road test, often for a much longer time than the remaining duration of the Michigan license. However, Florida has extensive identification requirements including (1) primary identification (e.g. a certified copy of a birth certificate or a valid passport), (2) proof of a Social Security Number, and (3) proof of the residential address. You should carefully review the requirements on the Florida Highway Safety and Motor Vehicles website.
- Either a valid voter’s registration or a Declaration of Domicile reflecting the homeowner’s Florida address. If the homeowner is planning to register to vote in Florida, which is recommended, this again requires some advance planning. Registration can be accomplished online. Note that Florida requires new residents apply for a driver’s license within 30 days of establishing residency and register vehicles (and obtain insurance) within 10 days of establishing residency, so filing a Declaration of Domicile will start these respective clocks.
- At least one of your automobiles must be registered in Florida. In order to register a vehicle in Florida, you must have insurance for that vehicle from a company doing business in Florida. In fact, it might be beneficial for you to register all your vehicles in Florida since insurance premiums in the state are typically much lower than premiums in Michigan. However, the first Florida license plate you obtain for each vehicle requires a hefty one-time payment of $250.
- Proof of ownership of your property in the form of a copy of a tax bill or your deed. In many cases, particularly if you have owned the residence for a while and are applying for the homestead exemption online, the Appraiser’s office will have a record of your ownership of the property. If you hold the title in trust, you may be required to furnish a Certificate of Trust or certain relevant trust pages as well. If you hold title (or plan to hold title) in a trust, it may be necessary to amend the trust to include a homestead paragraph indicating the grantor and/or his or her spouse, if any, has/have the exclusive and continuous present right to full use, occupancy and possession of the homestead residence for life. Without this provision, a homestead exemption may be denied by certain assessors. Including certain language in deeds transferring a Florida residence into a trust may eliminate the need to later furnish a Certificate of Trust when applying for the homestead exemption. A Florida-licensed attorney should be consulted prior to vesting ownership of your real estate in trust to avoid any unnecessary complications.
- Your application for exemption may be provisionally denied until you can furnish a form signed by the Assessor in any other county in which you own residential real estate – whether in Florida or Michigan – that you are not claiming a homestead exemption for that property. A copy of the request to rescind your Michigan principal residence exemption will not suffice since there is no proof that the municipality, in fact, rescinded the exemption.
Fortunately, once you’ve taken these steps, it shouldn’t be necessary to take them again. Just keep telling yourself “I’m doing this for a [tax saving] reason” as you slog through the bureaucracy.
Have questions? Our Estate Planning Practice Team includes several attorneys licensed to practice in Florida, as well as attorneys dually licensed in Michigan and Florida. Contact one of our Naples, Florida attorneys if you have questions about the Florida Homestead Exemption.
This advisory was originally published January 21, 2014. It has been updated to reflect current information as of April 1, 2022.