Important Information for Homeowners and Buyers: the Impact of Amendment 10
Understanding Amendment 10 will help you avoid being surprised by higher real estate taxes. Amendment 10 was born in 1992 when voters amended the Florida Constitution so that the Assessed Value of properties with Homestead Exemption (HEX) are capped at 3% or the Consumer Price Index (CPI), whichever is less. The key to understanding Amendment 10 is the chain of events triggered by the title change of a home with HEX – such as when a home sells. First, the cap is removed from the Assessed Value. As a result, the Assessed Value (see 5 below) may increase. If the Assessed Value rises, then so does the Taxable Value (see 6 below). And when the Taxable Value increases, the taxes of your home may jump.
As you can see, HEX and the Amendment 10 cap are linked. HEX is not transferable. However, a new homeowner may inherit the previous owner’s HEX. (If HEX is granted, it is only to the owner of record as of January 1.) If the buyer does inherit HEX, the Assessed Value remains capped only for the current year. When the cap is removed the next year, the Assessed Value equals the Market Value (see 4 below). If the Market Value of your home is currently higher than the Assessed Value of previous years, there is no escaping a rise in the Assessed Value. Once the Assessed Value increases so too does the Taxable Value of your home. When the Taxable Value rises, typically the real estate taxes increase (see the example below). For the uninformed, the tax surprise can arrive on the first bill if the buyer did not inherit the seller’s HEX or on the subsequent bill if the buyer did inherit HEX.
To understand when the Assessed Value of your new home is capped, you must know your Base Year. The first year that a homeowner applies for and receives HEX is called the Base Year. The cap is only applied to the Assessed Value in the years following your Base Year. In the Base Year the law requires that the Assessed Value equal the Market Value. If as a new owner you want to receive HEX, then you must apply for HEX on or before the March 1 deadline of the next year. The cap remains so long as the title remains unchanged and the homeowner continuously receives HEX on the same home. (For exceptions see Chapter 193.155, Florida Statutes.) New construction, alterations or improvements are not capped the first year they are placed on the tax roll but are thereafter.
Example of How Amendment 10 Works
Example assumes that you bought a home in 2003 in a neighborhood with rapidly rising sale prices.
Year
20011
2002
20032
20043
Market Value4
$150,000
$175,000
$200,000
$250,000
Assessed Value5
$150,000
$152,400
$156,058
$250,000
Amendment 10 Cap Rate
No Cap (Seller's Base Year)
1.6%
(2002 CPI)
2.4%
(2003 CPI)
No Cap (Buyer's Base Year)
Savings in Assessed Value Per Amendment 10 Cap
0
$22,600
$43,942
0
Homestead Exemption (HEX)
$25,000
$25,000
$25,000
$25,000
Taxable Value6
$125,000
$127,400
$131,058
$225,000
Taxes (Hypothetical)7
$3125
$3185
$3276
$5625
1Seller purchased home April 15,2000. (Therefore, the seller’s Base Year is 2001 after being granted HEX for 2001.)
2Buyer (you) purchased home on February 14, 2003 and inherited the HEX for 2003.
3Base year due to a change in ownership and granting of HEX to buyer for 2004. In the Base Year the Market Value equals Assessed Value. In this example, the Assessed Value increased approximately $93,900 or 60%.
4 Market Value -- a.k.a. Just Value -- is an estimate of what the home would sell for after the costs of are subtracted. This estimate is based on recent and comparable home sales and if there are any, residential vacant sales.
5Assessed Value is the value after Amendment 10 is applied to the Market Value.
6Taxable Value is the dollar amount used to calculate property taxes (see 7 below).
7These taxes are hypothetical because each year the millage usually changes. Your property taxes are calculated by dividing the Taxable Value by 1000, multiplying by the millage, and adding any non-ad valorem taxes such as waste, special taxing districts, road, fire, etc. For the sake of simplicity this example uses a millage of $25 per thousand dollars of Taxable Value and excludes non-ad valorem taxes.
