Homestead tax exemption could double, but cause shortfalls

UPDATE 2/7/24:

The Florida House of Representatives passed a bill to increase property tax exemptions in Florida annually with inflation. 

Florida lawmakers passed HJR 7017 with a margin of 86-29 – more than enough to meet the two-thirds requirement. The implementing legislation, HJR 7019, directs the Florida Legislature to make sure fiscally constrained counties get a budget offset to make up the difference.

The Florida Senate does not yet have a matching bill for HJR 7017. Another homestead exemption bill that would add an additional $25,000 of homestead tax exemption has at least one more committee to get through. 

Original story below:

The full Florida House will vote Thursday on a proposal to increase the homestead tax exemption annually based on inflation. 

It’s part of a pair of measures aimed at giving voters the opportunity to increase property tax exemptions in Florida come next November’s election. Economists project that the two measures would cut taxes by $1 to $1.1 billion statewide in the first year alone.

But one homeowner’s tax break is another government’s budget cut. The bill would leave local governments in Florida scrambling to fill the hole, and opponents say it would shift the tax burden from property owners to renters and businesses. 

“We’re a residential city, with nearly 11,000 homes under homestead,” said Winter Springs Mayor Kevin McCann. McCann is advocating that Winter Springs begin planning now for what to do if the measures pass. 

“If we lose that, we’re gonna have to have some difficult conversations,” McCann said. 

A looming $21.3 million budget cut to Seminole County governments

There are two bills moving through the Florida Legislature that could increase the property tax exemption in Florida. 

HJR 7015 – Homestead Exemption Increase would have the biggest immediate impact. Currently, homeowners can get a combined $50,000 in exemptions from property tax. The first $25,000 of a home is exempt from all taxes, and the value from $50,000 to $75,000 is also exempt (except for school taxes). 

HJR 7015 would increase that exemption by $25,000, to a maximum of $100,000. 

“This is pretty historic in a sense,” said Sarasota Republican James Buchanan, who sponsored the measure. “We’re talking about $1 billion to $1.1 billion in tax savings for property owners that have homesteaded properties in Florida. So it is a significant amount.” 

The impact could be particularly sharp on bedroom communities like Seminole County, where some 94 percent of the tax base would be eligible to get the break.

“Most people will get the full benefit because their property value is over $100,000,” said Katie Grasso, chief operating officer of the Seminole County Property Appraiser’s office. “It does impact a high majority of the properties here.”

According to an analysis performed by Grasso, Seminole County homeowners would save a combined $21.3 million. Seminole County’s government would take the biggest hit, at $11.2 million, followed by the county’s municipal and fire district, at $4.7 million. The cities taking the biggest financial hit would be Sanford, losing $1.3 million, and Oviedo, losing $1.2 million; Winter Springs would lose an estimated $540,000. 

One thing to note: HJR 7015 doesn’t affect school taxes. So school district budgets would not be affected at all.

The second measure is HJR 7017 – Annual Adjustment to Homestead Exemption Value. This would increase the sales tax exemption annually by inflation. The total impact statewide is harder to gauge, but economists estimate that it would be a $22.8 million impact in its first year, and by 2028, the tax cut would grow to more than $111 million. 

This measure is further along through the Legislative process, with the full Florida House voting on it Thursday. 

“As the Supreme Court once said, where ad valorem taxation is concerned, one person’s exemption is another person’s tax,” said Bob McKee, deputy director of the Florida Association of Counties, speaking against the proposals to lawmakers last week. “This proposal shifts the tax burden from homeowners to businesses, to renters, and to second homeowners.” 

What happens next for property taxes in Florida

HJR 7017, which increases the property tax exemption by inflation, will get voted on by the full Florida house Thursday. If two thirds of lawmakers approve it, it could go on to voters in the November 2024 election, where 60 percent of voters would have to approve it to take effect.

HJR 7015, increasing the total property tax exemption, passed through one committee, and still needs to get through a second committee to get to the full House vote. 

There is one possible slowdown for the measures: Neither HJR 7017 or HJR 7015 have a counterpart in the Florida Senate – yet. While that’s not typical this late in session, lobbyists say it is still possible that state senators could get matching proposals through in time. 

Charles Chapman, Legislative Consultant with the Florida League of Cities, said cities facing budget cuts would have to defray infrastructure projects, reduce funding for services like police, fire and libraries, or raise taxes to make up the difference.

“The Senate has not filed a companion bill to date,” Chapman wrote. “Our hope is that the Senate will not agree with the House of Representatives, and no bill will be filed. If a bill is filed, we sincerely hope the Senate will work with us to help cities continue to provide the taxpayers with the services they expect.”