Understanding Florida Property Taxes
I’m not a tax expert by any means. I can’t guide you like a CPA can -minimizing liability and optimizing benefits like depreciation, interest deductions, repair and maintenance, travel deductions, pass-through deductions, when to 1031, and definitely more.
But I can tell you how I estimate taxes when I analyze deals. It sounds simple, but there’s more you need to know if you’re going to invest here than “no state income tax” and low property taxes.
** Disclaimer
Again, I’m not a tax professional. While I think I know about this, I shouldn’t replace a CPA.
Looking for your next rental property in Tampa Bay and value my insight? You can schedule your initial conversation with me one on one below.
Trusting Tax Info on Listings
Whether looking at one of my listings or off market channels like Loopnet or Investorlift, you’ll notice that list agents are responsible for marketing the deal as best they can. Telling a story or putting an angle or new perspective around the photos or marketing description are ways to make buyers want the property. For investment deals, list agents do some sneaky things with the numbers. They tell you current tax and insurance figures. They provide cap rates instead of CoC (cash on cash) return on investment. Sometimes they give pro forma rents that are 5 years into the future pro forma.
Agents will list what the current seller is paying in taxes. They could have owned this property for 5, 10, or 30 years. In a market, where property and assessed values are appreciating quickly, even 2 years can mean a jump in taxes. It’s not necessarily the tax rate that changes, it’s the value of the property that gets reassessed by the county for the buyer after each sale.
To be clear, the MLS does require listing agents like myself to input the current sellers property tax bill on the listing. That’s not sneaky or deceptive. It’s required information to list. What is sneaky, is off market channels and even agents on-market promoting such a low annual tax. Especially when they know the following information..
Florida’s annual tax increases are capped at 3 or 10% of assessed property value which is different from fair market value and applies to the current owner.
Generally any tax information you see on a listing or public records, is based off an older assessed value that has undergone limited annual increases over time. Especially if subject property was bought distressed and renovated over the course of 5 years, taxes will look very different for a new buyer!
Understanding How Homestead Works
If your property’s assessed value went up from 100k to 150k in one year, your taxes would be based off 103k.
This is beneficial over a very long time horizon. The 3% cap only applies to Homesteaded properties. This means you live in the property (even if it’s a househack). You’ll get an exemption of 50k to your property taxes each year and be capped at a much lower rate.
Property Assessment Vs Real Property Value
Tax assessments are done locally by each county. They have an algorithm that’s not as simple as a millage rate anymore. Real property value or fair market value is determined by… the market. And occasionally bad appraisals.
How to Know Your Taxes
So we know the property will get reassessed after purchase. How do we estimate taxes for investment deals?
County tax appraiser websites.
Each county I service will have their own website where you can enter an address, two small details, and it will either pop out an estimate value or a range.
Once you get the hang of an area, you’ll know the average percentage and apply that figure to the calculator.
By the way, I have a free calculator here on my website. Check it out under “Free tools”.
I’ll link all the county appraiser websites below.
