People often perceive Palm Beach properties as luxurious commodities with annual taxes as high as the home price tag itself. However, Florida home buyers are often pleasantly surprised to learn about the property tax rates, benefits, and deductions in Palm Beach County. “One of the first questions my clients ask when previewing a home is how much are the taxes?” says Greg Poore, a real estate professional with NV Realty Group who specializes in The Club at Ibis and Bay Hill Estates. “Sometimes, clients will opt for a smaller scale townhome or decide to rent a condo even though they can afford a larger single family home simply to save on taxes.” While the tax rate is higher than neighboring Martin County, Palm Beach real estate tax is not as excessive as people may perceive. “Usually, once I explain all the home exemptions and outline the county’s numerous amenities and attractions, clients find the rate to be remarkably reasonable, especially compared to other states such as New York and Connecticut,” he adds.
Navigating Property Taxes in Palm Beach
Currently, the Palm Beach County’s tax rate is $4.78 for every $1,000 in taxable value, a rate that has not changed in seven years. Commissioners recently toyed with the idea of reducing the tax rate since the increase in home values has generated considerably more revenue for county coffers; instead, representatives agreed to keep the flat fee which means no change for primary homeowners but a sizeable increase for second homeowners.
Before purchasing a primary or secondary home in Palm Beach County, it is important to examine all the tax costs, exemptions, and benefits.
Homestead ExemptionHistorically, homestead exemptions date back to the 19th century as a way to protect home values against rising property taxes, prevent creditors from claiming a home, and provide widows or widowers the financial ability to keep the same residence. In Florida, homeowners are eligible for homestead exemptions no matter the price of the home. Presently, property owners receive an automatic $25,000 exemption applied to the first $50,000 of the home value and then another $25,000 exemption if the assessed value is between $50,000 and $75,000. Owners may rent their homes out for 30 days or less and still receive this benefit; however, rentals lasting longer than 30 days do not qualify for homestead status.
According to real estate attorney Greg Cohen, one pertinent piece of information to keep in mind is the January 1st valuation and determination date. “If the closing date is January 2nd, for example, the new owners cannot apply for homestead exemption on the property for that year as they did not own it on January 1st. However, if the previous owners still maintain the home as their homestead through the January 2nd closing date whereby it was their homestead on January 1st, then the homestead exemption and applicable CAP would remain for that year,” he explains. “Therefore, from a legal standpoint, it is wise to have the sellers maintain their homestead through the closing and not relocate or transfer it to their new home until after the closing date. This can save new property owners a tremendous amount of money,” he says.
In an effort to expand the program and encourage residents to purchase homes, Florida legislatures will allow voters to determine whether or not to increase the homestead exemption by $25,000. Proponents of the measure claim that the expansion will allow affordable housing options for new residents and will save current property owners more money as well. Should this upcoming vote pass, it will likely be a couple of years before the legislation goes into effect.
Save Our Homes (SOH) CapPer state law, homestead exemption properties may not increase more than 3% each year for property tax purposes. The SOH Cap ensures that homeowners are able to continue to afford their residence and not be “taxed” out of their community. Should the fair market value be less than the 3 percent cap, the appraiser will utilize the lowest assessment. If the owner sells the home, the property is reassessed and the 3% cap cycle starts over with the new price point.
Non-homestead properties receive an automatic SOH Cap of 10%, which means that the home’s assessment value can not increase by more than 10% each year. While this figure may seem high, many cities within Palm Beach County had taxable valuations that exceeded the 10% mark from the fiscal year 2016 to 2017. These include North Palm Beach, Lake Worth, Greenacres, and Loxahatchee Groves.
PortabilityAnother benefit for current Florida homeowners is the privilege to take their tax savings with them. For example, if a family decides to move into a spacious, more expensive home, their present tax rate is portable. While the math equation to figure in market value and assessed value for both the current and future homes is tricky, the Palm Beach County Property Appraiser Office takes the guesswork out of portability. The only preliminary requirement is that the homeowner has an existing homestead property and submits a new application within two years of selling the original property. This means that an individual can sell his or her homestead property, rent a condo for a short time, and then purchase a new property in Palm Beach County (before the two year mark expires) without losing their previous homestead benefit. When the individual applies for homestead, the property appraiser will communicate whether or not he or she qualifies for portability.
Additional ExemptionsApart from homestead, other Palm Beach County property exemptions are available for individuals, families, veterans, active military, law enforcement, first responders, and various institutions. Senior citizens with a limited income (currently less than $30,000) are able to apply for additional exemptions ranging from $5,000 to $50,000 depending on the municipality. Similarly, civilians with total or permanent disabilities receive credits ranging from $500 to full exemption status. Active duty military, veterans, and veterans wounded in combat are also all eligible for varying tax discounts. To assist families, homeowners who build a “granny flat” on their property to accommodate their parents or grandparents are granted a separate exemption. Finally, institutions or non-profits that use the property for charitable, religious, or educational purposes are given an additional reduction. Taxpayers must apply for all exemptions, including homestead, by March 1st.
Early Bird Specials & Payment PlansThe Palm Beach County Tax Collector Office offers incentives for residents to pay their property taxes early. Homeowners who submit payment by November 1st get a 4% discount; by December 1st a 3% discount; by January 1st a 2% discount; and by February 1st a 1% discount. In order to receive this generous discount, the entire tax bill must be satisfied in one payment.
Many property owners prefer to make their tax payments via installments, and the Palm Beach County Tax Collector makes this process an easy one. The only caveat is that homeowners must apply in advance online or in person at the local tax office. The taxpayer will receive quarterly invoices with the estimated cost divided into fourths. Payments are scheduled for June, September, December, and March. Although the deadline has passed for the 2018 installment schedule, interested property owners may apply for 2019.
No State Income TaxWhen compared to states like New York, Connecticut, New Jersey, and Massachusetts, Florida’s property tax rate seems more than fair. According to a recent report published in USA Today, Florida ranks as the 22nd lowest tax burden state in the nation for property tax. Florida attorney Greg Cohen explains that “Florida is right in the middle. It’s not the worst state in regards to property tax and it’s not the best. However, considering the state has no income tax, the property tax rate is a justifiable revenue source to keep our region remarkable.”
As one of the few states that does not collect an income tax, Florida is an attractive choice for business tycoons, celebrities, and professional athletes. “For many, the high cost of property taxes is offset by the state’s no income tax policy,” says Greg Poore. “Plus, as I mentioned previously, the public amenities, well-manicured parks, recreational fields, expansive libraries, top ranked schools, and quality utility services, are all funded by our tax dollars.” After all, paradise comes with a cost.
Current homeowners who qualify for property tax exemptions can submit their application through the Palm Beach County Property Appraiser office. To preview properties for sale in Palm Beach, contact a real estate professional at NV Realty Group.