Tax Perks of Florida Real Estate

Only a handful of states in the country do not have income taxes. Florida happens to be one of the states, along with Texas, Nevada, and several others. Zero income taxes in the state of Florida does not just apply to the money that you earn working a W2 job or a 1099 business. It also applies to your rental income in the state. You see, a lot of people are unaware of this. If you happen to invest in a rental property in the state of Florida, don't expect to pay more on the money you make in the form of state income taxes. Instead, you'll get to keep the cold hard cash that you would have had to hand over if you lived in a state that levied those income taxes. The lack of state income taxes is one of the main reasons why many real estate investors choose Florida as a place to constantly invest in.

Just as some states in the union have no income taxes, others have something called a homestead exemption. A homestead exemption is a property tax benefit that certain people can qualify for who have primary residences in Florida. This is a tax benefit used to allow qualifying residents to reduce the assessed value of their homes by up to $50,000.

If your home is assessed at a value of $400,000, you would pay property taxes relative to that amount. Except if you had the homestead exemption, it would drop your value to $350,000 for the sake of paying property taxes. The first $25,000 of this $50,000 is applied to all tax authorities in the state, while the second $25,000 only applies to local governments.

However, in 2024, Florida voters passed Amendment 5, which made a change to the homestead exemption. Now for 2025 and beyond, the homestead exemption will be adjusted for inflation every year, which can lead to even larger exemptions.

The state of Florida has another very interesting tax benefit for homeowners. In 1992 Florida voters voted to limit the annual assessed property value increase to 3% or the rate of inflation, whichever is lower. This is a massive hidden tax benefit of owning real estate in Florida because it prevents Florida homeowners from having their property taxes skyrocket if the price of housing in the state moves up quickly, which it often does. Keep in mind that the tax benefit only applies to properties that are homesteaded. If you have 12 properties in Florida, you won't be able to use this benefit for all of them. Only the property that qualifies as your homestead would see the homestead cap on property taxes. If you sell the property down the road, the SOH cap on the assessed value is removed and the property is reassessed for the purpose of the sale.

Imagine that you owned a property in Fort Lauderdale, Florida, and that this property is your primary residence and homestead. Last year the property was assessed at a value of $500,000.

Now imagine that property values in Fort Lauderdale shot up by 10% this year due to millions of people fleeing high tax states like California, Massachusetts, New York and New Jersey and moving to Florida.

Even if the market value of your property also increased by 10% to $550,000 because of the Save Our Homes cap, your property would not be able to be assessed by 550,000.

The maximum value that it would be able to be assessed at would be 515,000 because 3% of $500,000 is 15 grand. This is an amazing tax benefit of owning property in the state of Florida and is a hard one to ignore. The longer you own property and use it as a primary residence, the more important that this tax benefit is to you.

4. Property Tax Benefits for the Disabled

The state of Florida has some solid property tax benefits for people who are permanently disabled. For example, Florida residents with a total and permanent disability and veterans with at least 10% disability caused by a service connected health issue are eligible for a $5,000 property tax exemption. So if you are injured while serving in the armed forces or if you are totally disabled from another cause, you may qualify for a reduction in your property taxes by a total of $5,000 in the state of Florida. Men and women in uniform go through a lot to protect our country and there are a wide array of injuries that can sustain on the job that can cause disabilities. I'm glad that people who served our country are able to get property tax benefits in the beautiful state of Florida. I'm also glad that Florida provides benefits to non veterans with disabilities as well.

5. No Florida Estate Taxes

Just like it does not have income taxes, the state of Florida does not have estate taxes. In fact the state completely abolished its estate tax in 2004. If you're unaware of what an estate tax is, it is a tax on the estates that people leave behind to their beneficiaries after they die. There are both federal estate taxes and state estate taxes, and estates have to be a certain size in order to qualify for an estate tax. Note that not all states charge estate taxes. However, because Florida is one of the states that does not charge estate taxes, it means that it is much easier for heirs to inherit estates that include properties without being bought down by estate taxes. Keep in mind that even if you will not owe any estate tax on the property you inherit in the state of Florida, you could still potentially owe federal estate tax if the estate you inherit is large enough. In 2025, you will have to pay federal estate taxes if the estate that you inherit is larger than $13.9 million. If you inherit this estate in Florida for Floridian assets, then you would not have to worry about tacking on extra state estate taxes.

Real estate is one of the only investments that has the following 3 benefits:

🐊 In 2022, Florida ranked third nationwide in Medicaid fraud recoveries, with approximately $88.3 million recovered through criminal and civil judgments. That same year, Florida’s estimated improper payment rate was 7.0%, translating to roughly $1.503 billion in improper Medicaid payments—covering issues like eligibility errors and documentation problems.

Florida, Texas, and California consistently rank high in the US for Medicaid fraud year over year.

Till next time,

^{The content provided in this newsletter is for informational purposes only and is not intended to be, and should not be construed as, professional tax, legal, or financial advice. While we strive to ensure accuracy, tax laws are complex and subject to change. Always consult with a qualified tax professional or financial advisor regarding your specific situation before making any decisions based on the information provided herein.}