Buying home in Miami-Dade County marks a significant milestone, yet it's frequently accompanied by the realization of unexpectedly higher property taxes.
Whether seasoned or novice buyers, they may ask: Why do property taxes increase upon purchasing a new home or new construction?
Unraveling the factors contributing to this phenomenon entails exploring various facets of the local tax system and economic environment.
Market Value Assessment
In Miami-Dade County, one of the key factors affecting property taxes is the Assessed Value of the property. This value is determined by the county appraiser's office, considering factors like location, size, amenities, and recent sales of similar properties.
Given Miami-Dade's desirability and thriving real estate market, property values in this area often surpass those in other regions, resulting in higher assessed values and
subsequently higher taxes.
The assessed value of your new property will greatly influence your property taxes. Even with the benefits of the homestead exemption and portability, if your new property holds a higher assessed value than your previous one, you may still experience an increase in taxes.
Nonetheless, these exemptions will help alleviate the rise compared to not having them in place.
Let's examine a hypothetical situation involving two different buyer profiles: an existing homeowner selling their current property to purchase a new one, and a first-time homebuyer.
We'll delve into the role of property taxes for each.
Existing Homeowner
A homeowner in Kendall sells their property for $900,000 and had been paying $6,000 in property taxes annually. They then buy a new home worth $1.2 million, using Florida's portability and homestead exemptions. By transferring $500,000 of the Save Our Homes portability benefit, they reduce the assessed value of the new property.
The new property's assessed value for taxation is $700,000, calculated by subtracting the $500,000 Save Our Homes benefit from the $1.2 million purchase price. This results in annual property taxes of $10,000. Compared to the $6,000 they were paying in property taxes on their previous property, this represents a $4,000 increase in taxes for the new property. However, despite the increase, it's still less than what they would pay if taxes were solely based on the new home's purchase price of $1.2 million.
First-Time Homebuyer
Suppose that a first-time homebuyer purchases the existing homeowner's property for $900,000. Property taxes for them are solely based on the purchase price of the property. Typically, they won't benefit from any homestead exemptions until they file for Homestead exemption for their new primary residence. Therefore, they are subject to property taxes based on the purchase price without any immediate exemptions.
Homestead Exemption Limitations
While Florida offers a homestead exemption to homeowners, providing a deduction on a portion of their property's assessed value, there are limitations to this benefit. The Save Our Homes Amendment caps the annual increase in assessed value for homesteaded properties at 3% or the change in the Consumer Price Index (CPI), whichever is lower.
When a property changes ownership, the assessed value is reset to its current market value, eliminating any accrued benefits from the previous owner's homestead exemption. This reset often results in a significant increase in property taxes for new homeowners.
Additional Assessments and Fees
In addition to basic property taxes, homeowners in Miami-Dade may be subject to various assessments and fees, including special district assessments, municipal service fees, and voter-approved bond assessments. These additional charges contribute to the overall tax burden on homeowners in the county.
Public Services and Infrastructure
Miami-Dade County boasts a wide range of public services and amenities, including top-rated schools, parks, public transportation, and emergency services. While these services enhance the quality of life for residents, they also require funding, much of which comes from property taxes. The higher property tax rates in Miami-Dade are partly attributable to the county's investment in maintaining and improving its infrastructure and public services.
Budgetary Considerations
Local government budgetary decisions also play a significant role in determining property tax rates. Miami-Dade County faces various fiscal challenges, including funding for essential services, infrastructure maintenance, and addressing socio-economic disparities. To meet these demands, local officials may opt to increase property tax rates, resulting in higher taxes for homeowners.
State and Local Policies
Finally, property tax rates and policies are influenced by both state and local regulations. While Florida generally has lower property tax rates compared to many other states due to its lack of state income tax, local governments have the autonomy to set their own tax rates and levy additional assessments as needed. Factors such as population growth, economic development, and legislative changes can also impact property tax rates over time.
Whether buying a home previously owned or newly constructed, buyers in Miami-Dade should be prepared for higher property taxes compared to their previous residences or properties in other areas. These taxes, while significant, contribute to the maintenance of essential services and infrastructure that enrich the lives of residents across the county.
About Author: Liz Kenneally, a seasoned Miami real estate agent, boasts extensive experience in the city's vibrant market. Specializing in sought-after neighborhoods including Coral Gables, Dadeland, Continental Park, East Kendall, Pinecrest, South Miami, and The Falls. Liz is fluent in both English and Spanish, ensuring smooth transactions for her diverse clientele. Contact her at 786-423-3348 or complete the simple EMAIL AGENT form located beside this blog content.