Florida property taxes are generally the same for homestead and non-homestead properties. The main difference is how quickly taxes can increase.
What is the Non-Homestead Assessment Limitation?
The non-homestead assessment limitation limts increases in the assessed value of real property other than homestead properties to no more than 10% per year.
It applies to:
- Commercial property
- Residential property held as a rental property, second home, vacation home, or otherwise without the Homestead Exemption
It does not apply to property with the agricultural classification.
See Florida Statutes 193.1554 and 193.1555.
How does the Non-Homestead Assessment Limitation work?
Each property has a market value and assessed value for Florida property tax purposes.
The market value is the current value based on current market factors.
The assessed value is the value that you pay taxes on. When you buy a property, the market value and assessed value should be equal. In future years, the Non-Homestead Assessment Limitation may keep the assessed value below market value.
Example
| Market Value | Assessed Value | |
| Year 1 | $100,00 | $100,000 |
| Year 2 | $125,000 | $110,000 |
| Year 3 | $150,000 | $121,000 |
The assessed value doesn’t increase as quickly as market value because it can’t increase by more than 10% per year. (The assessed value will never be more than the market value if values rise by less than 10%).
If you have a 2% property tax rate, that $39,000 difference in year 3 gives you a $780 savings in property taxes.
What about property improvements?
The Non-Homestead Assessment Limitation only applies to the existing property as it currently is. It does not apply to increases in market value or assessed value due to improvements.
In the year of the improvements, the full increase in value from the improvements is added to the assessed value. It does not count towards the 10% limit if market values also went up.
In future years, the new assessed value (original property plus previous improvements) can only increase by 10% per year.
How is this different than homestead properties?
Homestead properties follow Save Our Homes rules. Those rules limit assessed value increases to the rate of inflation but no more than 3%.
Depending on inflation, a homestead property could see a 0% to 3% assessed value increase, while a non-homestead property can increase by up to 10%.
What happens if market values slow down?
If market value growth slows down, assessed values will keep increasing by 10% per year until they catch up with market values.
Example
| Market Value | Assessed Value | |
| Year 3 | $150,000 | $121,000 |
| Year 4 | $155,000 | $133,100 |
| Year 5 | $160,000 | $146,410 |
| Year 6 | $165,000 | $161,051 |
| Year 7 | $170,000 | $170,000 |
What happens if market values fall?
If market values fall when the assessed value is below the market value, the assessed value will continue increasing by up to 10% per year until it catches up. This is known as recapture.
The assessed value will never be higher than the market value. If market value drops below the assessed value, the assessed value drops with it.
Example
| Market Value | Assessed Value | |
| Year 3 | $150,000 | $121,000 |
| Year 4 | $145,000 | $133,100 |
| Year 5 | $140,000 | $140,000 |
| Year 6 | $135,000 | $135,000 |
What happens in a non-homestead property is sold?
Generally, non-homestead property is reset fo full market value when it is sold or transferred to a new owner. The new owner doesn’t receive the previous owner’s lower assessed value.
The new owner will pay property taxes based on the current market value in their first year of ownership and will have their own 10% limit for future years.
There are certain exceptions to the reset including most transfers between spouses (including divorce) and certain other administrative changes. Contact a Florida property tax expert to review your specific situation before making any moves.
Does the Non-Homestead Assessment Limitation apply to property tax increases?
The Non-Homestead Assessment Limitation only limits property tax increases due to changes in assessed value. It does not limit property tax rate increases or added non-ad valorem assessments.
For example, your county votes to increase property taxes from 2% to 3%. That’s a 50% increase. You will pay the full 3% even with the Non-Homestead Assessment Limitation.
Do you need to apply for the Non-Homestead Assessment Limitation?
There is generally no need to apply for the Non-Homestead Assessment Limitation since it typically automatically applies based on property type. However, you may want to contact your property appraiser to confirm the tax benefits on your property.
