Floridians May Change Their Constitution to Slash Property Taxes. Is That a Good Thing?

Floridians are feeling the pressure of inflation. Higher insurance premiums. Higher fuel costs. And Floridians have extra challenges, given the weather extremes impacting the state.

A typical deed holder also has to pay property taxes of around $3,000 a year, based on current Florida home values. But in the upcoming election, Floridians will have their say on a proposal to cut taxes on properties with homestead exemptions by amending the state constitution. The “Save Our Homes from Excessive Property Taxes” (Amendment 3) proposal, if successful, will mark a major policy shift with long-term impacts.

To pass, it needs to rack up 60% “yes” votes. What will Florida voters do? What should they do?

Deed Holders’ Homestead Advantage

Florida deed holders may apply for a homestead exemption where they reside. It allows a property tax deduction of up to $50K from their home’s taxable value.

With the help of this tax break, homesteaded deed holders contribute only about a third of the property taxes paid in Florida. Other properties (rental or vacation homes, out-of-state deed holders, commercial buildings, etc.) make up the other two-thirds.

Amendment 3, which could pass this November, would raise the homestead tax exemption to $150K in 2027, and to $250K in 2028. And the breaks wouldn’t stop there. Exemptions would continue to expand. From 2029 onward, the homestead property tax exemption would be adjusted for inflation, based on the Consumer Price Index.

The swelling advantage would primarily benefit deed holders. Renters would not receive the same boost. Rental properties could still see property taxes climb each year along with real estate inflation. And that would be reflected in the price of rent.

Learn with Deeds.com about how tax officials calculate the value of your deed.

Enhanced Tax Protections: Arguments in Favor

What’s the main plus? If Amendment 3 succeeds, deed holders will receive weighty rights to keep more of their property value off-limits to local tax collectors. Florida’s constitution would be modified accordingly. A new header would appear: Homestead Tax Exemptions, Property Assessments, and Spending Restrictions Amendment.

This is aligned with Florida’s well-known history of pleasing the taxpayer. Florida has no state income tax. This policy has attracted people and businesses to the state. Once they arrive, newcomers to Florida find the state offers a relatively low cost of living in general.

Advantages seen in the proposed constitutional amendment include these factors:

• Current homeowners would pay less in property tax.

• This could keep the cost of owning a Florida home reasonable, given steadily rising insurance rates and weather-related costs.

• Property value assessments on rental, vacation, and commercial properties would be capped at increases of just 5% (from the current 10%). This enhanced cap on yearly tax hikes for properties other than primary residences could offer increased stability for Florida’s business tax base. This would apply to commercial properties and non-homestead residential properties with no more than nine units, effective from 2027 onward.

Presumably the state government could send some funds to local governments to make up for these property tax breaks. But again, Florida has no state income tax, so the state has limited options for stepping in where local governments need assistance.

County, city, and town services have to get funding from somewhere. Therefore, the amendment specifically directs local governments to allocate property tax revenue to public safety, infrastructure, local government employee retirement benefits, and the like. What about services outside the core categories? How will they obtain funding? That remains to be seen.

Which brings us to…  

Arguments Against the Amendment

The change would reduce revenue from property taxes by $11.8 billion per year. That could lead to budget shortfalls for local governments, jeopardizing road maintenance, fire stations, public libraries, and the upkeep of beaches and parks. And it would do nothing to address the root causes of the inflation that prompted the outcry for lower taxes.

Opponents of the change claim it could end up creating many more negative results as well. The amendment could result in:

• Hiking the sales tax on retail goods.

• Increasing the documentary stamp taxes charged on deeds, mortgages, and other documents.

• Imposing special assessments or fees for waste disposal and stormwater management.

• Upping the costs of permits, inspections, car registrations, fuel taxes, etc.

• Placing more taxes on the hospitality industry.

Speaking of industry, even though yearly commercial and rental property tax hikes would be capped at a lower percentage (see the section above), hikes could still happen, up to 5%. Even a 1% hike is a lot. On a business property worth $5 million, that’s $50K added to the business owner’s yearly taxes.

Critics also anticipate higher fees for construction and renovation improvements—not good news for the Florida real estate market.

The counties with smaller tax bases are very likely to be hit hardest by the cuts. Larger cities are better equipped to adapt.   

So, is the relief for some worth the potential strain for all? The majority will give its opinion on November 3. Meanwhile, the Florida Fire Chiefs’ Association has weighed in against the proposal. That’s concerning…

Let’s take a quick look at a few more concerns and key details.

Considerations for Florida Deed Holders and Potential Buyers

Current and potential Floridians should check with their financial or tax advisers to go over the ways the amendment could affect them.

Note that only deed holders living in Florida before 2027 will qualify for the possible larger exemption. Buyers who arrive in 2027 will need to live in their Florida homes for five years to be eligible. That’s five years of paying thousands of extra dollars each year in some localities.

Of course, the outcome of the ballot proposal is a big question mark. And if voters usher it in, there are still more questions. A law will still need to be hammered out, setting forth the procedures to claim exemptions, rules that allocate local revenue to key services, and so forth. 

At least there’s one service not at risk of losing funding. The portion of property taxes that goes to school districts is expressly left intact. Great! But other services don’t have that luxury. And isn’t the value of a home based partly on the local services provided to a deed holder?

We’re looking forward to learning how Florida will vote in November.