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Tax plan to help new home buyers could save $1,500 or more

TALLAHASSEE — The property tax plan voters will decide on next year might save first-time home buyers $1,500 or more, an analysis shows, raising hopes among lawmakers that it could reinvigorate an ailing housing market that is vital to the Florida economy.

Backers of the proposal — held up by Gov. Charlie Crist and legislative leaders Friday as one of the few highlights in a grim session — are counting on the allure of lower tax bills to gain the required 60 percent voter approval in November 2010.

The break would apply to anyone who buys a home in 2010 and would affect taxes the next year.

"It's going to turn renters into buyers," predicted Rep. Carl Domino, the Jupiter Republican who worked on the plan and may try to tweak it next session.

A second provision providing a 5 percent assessment cap for nonhomestead property such as businesses and snowbird residences also promises significant savings though it is more difficult to calculate. And some critics say it will create inequities like those under Save Our Homes.

The new homestead break for first-time buyers gives a 25 percent exemption on just value, up to $100,000, and would be phased out over five years as savings under Save Our Homes accumulate. Save Our Homes caps assessment growth at 3 percent and protected property owners from the rapid value increases of recent years.

Under the new proposal, the buyer of a $200,000 home would get an additional $50,000 exemption during the first year. Using the statewide average of 16.8 mills, the total tax property tax bill would be $1,848 — or $504 less than if the new exemption did not exist.

Over five years, the savings would approach $1,500.

The buyer of a $400,000 home would save about $3,000, according to an analysis prepared for the Times/Herald by Tim Wilmath, director of valuation for the Hillsborough County property appraiser's office.

Savings vary from county to county based on millage rates. Taxpayers in the city of Miami, for example, faced a millage rate of 22.1 in 2008. If that held, the buyer of a $200,000 home would save nearly $2,000 over the five year life of the new exemption.

"It's just a great time for the first-time home buyer," Wilmath said, referring to the proposal, a new $8,000 federal tax credit and low interest rates. "Cumulatively they are very significant."

The plan was one of the final bills passed during the session and only got through after hard lobbying by Crist, the Florida Association of Realtors and others with a stake in the real estate market.

Crist invoked it during a speech after the session ended on Friday, a good sign it will be part of his platform as he runs for either re-election or U.S. Senate.

But some lawmakers are already talking about tweaking the proposal next session. Domino, for one, wants it to apply to anyone who has not had a homestead in Florida (right now, it applies to anyone who has not owned a home in eight years).

That way the state could better compete for out-of-state residents, Domino said. "I want to capture those people in Ohio," he added.

The nonhomestead cap may also be revisited next year. A 10 percent assessment cap was approved as part of Amendment 1 in 2008 but its usefulness is limited in normal market conditions.

It could save business and second-home owners about $433 million over three years, according to forecasts by state economists. Cities, counties and special taxing districts would lose that much. Schools are not affected by the cap.

The aggregate savings is calculated on a variety of factors, including market growth rates. Individual examples are more tricky to determine.

But consider a commercial building worth $5 million and an assessment growth of 7 percent. Based on the statewide average millage rate, the property owner would save just over $1,000.

Like Save Our Homes, though, the cap allows for the government to "recapture" some of the savings in years when the growth rate does not exceed 5 percent. Savings are also based on a cumulative effect.

"It's less about saving dollars in any particular year," Wilmath said. "It's more about having certainty when prices and assessments are rising rapidly, like in 2006 when assessments were increasing 20 percent or more."

The 5 percent cap already has come under criticism from Democrats and in some business circles because it has the potential to create disparities like Save Our Homes does now.

The 3 percent cap favors people who have lived in a property for a long time so a person who just moved into a neighborhood pays a lot more taxes even their property values are similar to others. The same could happen with businesses and second homes, experts agree.

Tax plan to help new home buyers could save $1,500 or more 05/10/09 [Last modified: Sunday, May 10, 2009 11:12pm]
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