Estimating Florida Property Taxes for Canadians
There is a myth that Canadians have higher property taxes on their rental properties than local landlords. This is FALSE. All owners of investment property in Florida are taxed the same, whether you are Canadian, Floridian, or Martian!
Property tax in Florida is determined by three factors:
- The tax rate for the property (which will be the same % for ANYONE that owns the home).
- The taxable value the local authority places on the property.
- Additional, flat fee, Non-Ad Valorem Assessments.
These are the ONLY three factors that go into determining property taxes; NOT where you are from.
This factor is straight forward without many complexities to it. You can look up a properties tax rate by finding the local county tax assessors’ website, or county property appraisers’ website. Simply google the county name of the home you are looking to buy and “Tax Assessor” or “Property Appraiser” and find the property search function to look this up. I give an example further below.
Once you look up the property on the county site(s), you want to look for the words “Millage Rate”. This is just a fancy way of saying the tax rate. To use the millage rate to calculate taxes, you will have to convert the millage rate to a percentage. To do this, just move the decimal one place to the left. So, a millage rate of 16.5, would be equal to 1.65%.
You can also find out what the current taxable value of a home is on the same county assessor or appraiser website. Know that the taxable value is NOT how much the home would be worth if it were for sale. However, you do not want to rely on what the county has a home’s taxable value at currently, as the tax assessor will re-assess the value the year after you purchase the home and will consider the price you paid for the home.
There are various discounts to the taxable value that are available to some homeowners in Florida. The myth that a Canadian investor will have to pay higher property taxes than a local likely originated from these available discounts. However, the availability of these discounts is the same for a Canadian investor just as much as they are for a local investor; unfortunately, neither investor is eligible. They are only available for homeowners that live in a home as their primary residence. Since this doesn’t apply to anyone with a second home or investment rental home, I will skip the details of the discounts available for the purposes of this article.
Keep in mind that the taxable value of property is re-assessed every year and will generally follow the market trend of values, if not exactly. So as the value of your property goes up, so will your taxes. As much as it hurts to see when your tax bill goes up from one year to the next, it also means the value of your property also went up (usually by way much more than the tax increase!) and typically your rents have increased as well to more than make up for the difference.
Non-Ad Valorem Assessments
Not all properties have these additional taxes, but many do. These taxes are typically a flat fee due yearly for various public services or other government required taxes based on each property. Common reasons you will see these on some properties include a flat yearly assessment for trash pickup, nearby public improvements that are linked to properties (drainage or road improvements) and usually total in the low 3 figure range. There are occasionally 4 figure assessments that can drastically increase taxes, like if a home is located in a “Community Development District”, but your real estate agent should flag these kinds of properties easily, and of course you can see these kinds of assessments by looking at the county tax assessor or appraiser’s website.
These assessments tend to last for decades if not permanently, so you should account for these flat fees to continue for as long as you own the property.
Estimating property taxes on a home you are looking to buy:
Step One: Find what the tax rate is for the specific piece of property you are looking to purchase. For example, in Orange County, the best site to look this information up is at is the county appraiser’s website: www. Ocpafl.org; and search for the specific property you are looking up with their records search function (typically you can do this by address).
On Orange Counties site, you can look up all tax related items on the “Values, Exemptions and Taxes” tab:
Look around for “Millage Rate”, which on Orange counties site is here:
And you can see for this home, the millage rate is 16.4127, or 1.64127%
Now, you can see on this web page that they tell you how much the current property owner is paying in property taxes right there at the bottom right. However, you never want to use the current owners taxes to estimate how much your taxes will be over the longer term. Remember, the appraiser will re-value the home after you purchase it, likely at a price well above what they have the homes taxable value at. That is why you want to pay attention to Step Two!
Step Two: Assume that the year after you buy the home, that the taxable value will be re-assessed. Know that it is very rare for the appraiser’s office to use the full purchase price as the taxable value of the home. A good rule of thumb is going to be to use 80% to 90% of the purchase price to estimate how much your tax bill will be the year after you purchase (yes, the year that you purchase, you can enjoy the lower tax bill of the previous owner for that year)
So lets use the property record above as an example:
- You purchase the home for $200,000.
- You see the millage rate for this home is 16.4127 and you convert it to a percentage of 1.64127%
- Take 85% of the purchase price ($170,000)
- Multiply $170,000 x 1.64127% and you get $2,790.16
Notice this amount is almost $700 higher than what the current owner is paying. This is based solely on the fact that the property appraiser doesn’t do a full re-assessment of the taxable value in most years, so the longer you own a property, the higher the chances your tax bill will be less than what a new owner would pay.
If you wanted to be more conservative with estimating property taxes, you can also use the full purchase price to multiply by the tax rate for a high property tax estimate of $3,282.54.
Large Non-Ad Valorem example:
You can see in the above example what you would see in the event of a large additional property tax. This particular home is part of a Community Development District (CDD) that charges an additional $797 per year, on top of a high 19 Millage tax rate!
Whew….ok that’s a little over 1000 words to help you estimate Florida Property Taxes on a potential home. You can do this yourself on each property you consider, perhaps in about 10 minutes time the first time, then less and less as you repeat the process; OR just ask your investor friendly agent to do this as part of their initial ROI estimate for you, CONTACT US for an ROI estimate, and only spend your time to double check everything when you make an offer and during your inspection period.