Amendment 5: Homestead exemption inflation adjustment

Property taxes are not anyone’s favorite words, but they are money that must be paid if you own Florida real estate.

Amendment 5 deals with homeowners, specifically those with a homestead exemption, which reduces a property’s taxable value.

A vote of yes supports an annual inflation adjustment to the amount of assessed value that is exempt from property taxation. It could save you money, but there’s more to it.

Let’s start by explaining the homestead exemption on a primary residence.

In this example, a home has an assessed value of $100,000. Currently, the property is taxed like this:

1. The first $25,000 is tax-exempt.
2. The second $25,000 is taxed.
3. The third $25,000 is exempt from all ad valorem taxes except school taxes. This is known as the second exemption.
4. The final $25,000 is taxed.

After that, all property valued at $100,000 is also taxed unless you qualify for another exemption.

What Amendment 5 would do is change the way the second exemption is adjusted.

If 60% of voters approve, Florida would adjust the second exemption based on the consumer price index (CPI). So, if the CPI is up 2%, homeowners would get the first exemption, the second exemption, plus 2%.

Matt Caldwell, the Lee County Property Appraiser, is a fan of Amendment 5 and says it’s a taxpayer win.

“The goal is for homeowners to pay fewer taxes. That’s essentially what this amendment would do. It pegs the benefit of the $50,000 deduction to inflation long term. So, with the way inflation has gone the last few years, you could see that benefit grow to $55,000, $60,000, $70,000 over the next few years, and all of that results in a lower value you’re paying taxes on, which should result in less taxes you’re paying as a homeowner,” Caldwell said.

The Florida Policy Institute agrees this would help homeowners. If a number is not adjusted for inflation, homeowners lose money. This amendment would make adjustments based on inflation.

The Florida Policy Institute said Amendment 5 would likely hurt local governments because they must make budget adjustments.

WINK News spoke with Esteban Leonardo Santis, PHD, the Florida Policy Institute’s budget and tax policy analyst, about Amendment Five and why it worries him.

“If we start cutting revenue, they’re either going to have to make up for that loss by cutting programs or increasing revenue elsewhere that could be higher property taxes, that could be trying to pursue some local option, sales taxes,” Santis said.

The Florida League of Cities worries that an economic downturn would make it harder for cities and counties to recover, especially if they do not have a large commercial property tax base from which to draw.

“State economists estimate that the impact on non-school, local government, property taxes of amendment five in the first year of implementation, it will be $23 million, then it will steadily increase, and by the fifth year of implementation, this will cost local governments across Florida in total $112 million and then up from there,” Santis said.

Sales tax could impact households struggling to make ends meet. Those for amendment five say you will get property tax relief.

“What the homestead exemption gives you a lower value on this part, so you are saving money. You are paying less taxes; at least, that is the goal. With the homestead exemption amount being adjusted for inflation, it should save taxpayers even more money over the long run,” Caldwell said.

A vote “yes” for Amendment 5 means you support an annual inflation adjustment; a vote “no” opposes that adjustment.

View the full amendment here.