What is the impact of natural disasters on property tax assessments in Florida?

I am receiving calls from current and prospective clients alike seeking to mitigate their payment of property taxes, particularly in light of the recent hurricane season. In fact, I was recently featured on WINK-TV news on this topic.

I am summarizing, in an outline format, some of the considerations of current and would be homeowners in the Sunshine State on this issue:

I. Tax Implications of Natural Disasters on Property Taxes

A. Property Taxes After Natural Disasters: In Florida, property taxes are primarily determined by the assessed value of the property. Natural disasters, such as hurricanes, can significantly reduce property values, which may lead to a temporary reduction in property taxes. However, this depends on the speed of rebuilding and recovery in the area. After a disaster, county property appraisers may reassess properties to reflect reduced market values. For example, Miami-Dade County implemented reassessment measures after Hurricane Irma in 2017. States like New York have introduced programs like the “Climate Change Property Tax Relief Act,” which allows temporary tax relief for disaster-affected properties. Florida does not yet have a comparable state-wide program but offers localized relief measures for storm-damaged properties.

B. Insurance Premiums vs. Taxes: Homeowners in disaster-prone areas face skyrocketing insurance premiums, particularly in Florida, where private insurers are exiting the market. This indirectly affects property taxes because insurance costs can deter buyers, lowering demand and property values in affected areas.

II. Trends and Demand in Disaster-Prone Areas

A. Demand for Property in Climate-Affected Areas: Despite climate risks, areas like Miami continue to attract buyers due to their economic opportunities and desirable lifestyle. Population growth and migration from high-tax states to Florida sustain demand. In California, areas affected by wildfires, like parts of Los Angeles County, have seen more substantial declines in property values in fire-prone zones. For instance, data from CoreLogic indicated a 10-15% decrease in property values for some wildfire-affected regions in California over the past two years.

B. Impact of Climate Change on Home Values: Climate change directly impacts property values by increasing the risk associated with properties in flood zones, hurricane-prone areas, and wildfire-prone regions. In Florida, properties within FEMA-designated flood zones often see reduced market appeal unless they have mitigation features like elevated foundations. Buyers are also wary of rising insurance premiums. In Miami, waterfront properties have shown slower appreciation rates compared to inland properties over the past five years. This partially attributable to the skyrocketing insurance premiums resulting from the non-renewal of existing policies and refusals by many insurers to write new policies in the Sunshine State.

III. Property Taxes in Flood or Fire Zones

A. Effect of Location on Property Taxes: In Florida, living in a flood zone may not directly increase your property taxes. However, mitigation requirements, such as raising structures or installing floodproofing measures, can indirectly increase the overall cost of ownership. In wildfire-prone California, areas with increased risk classifications by Cal Fire or similar agencies often see reassessments due to declining property values post-disaster, temporarily reducing property taxes.

B. Questions to Ask Before Buying Property—Key Questions for Prospective Buyers:
– Is the property located in a designated flood zone or wildfire zone?
– What are the local property tax rates? These can be found on county property appraiser websites.
– Are there additional assessments for community services, stormwater management, or disaster recovery?
– What are the projected insurance premiums, and are there any state-mandated coverage requirements?
– Has the property been reassessed or received any tax exemptions due to prior disasters?

IV. Opportunities to Minimize Property Taxes in Florida via Homestead Exemption

Florida’s homestead exemption allows homeowners to reduce the taxable value of their primary residence by up to $50,000, resulting in substantial property tax savings. For example, a home with an assessed value of $300,000 would only be taxed on $250,000 after the exemption. The Save Our Homes (SOH) cap further limits annual increases in assessed value to 3% or the Consumer Price Index, whichever is lower, protecting homeowners from sudden tax hikes as property values rise. Homestead protection also extends to asset protection, shielding a primary residence from most creditors under Florida’s Constitution.

V. Additional Guidance on Property Taxes

A. Finding Property Tax Information: Property tax details are publicly available on county property appraiser websites. For instance, in Miami-Dade County, buyers can visit the Property Appraiser’s site to view historical tax records and assessments.

B. Deducting Property Taxes: Property taxes are deductible for federal income tax purposes, but only up to $10,000 annually ($5,000 for married filing separately) under the State and Local Tax (SALT) deduction cap introduced by the Tax Cuts and Jobs Act of 2017. For example, a Florida homeowner paying $12,000 annually in property taxes can only deduct $10,000 on their federal return.

VI. Recommendations for Homeowners and Buyers

– Stay informed about the local real estate market and tax implications of climate risks.
– Consider investing in disaster mitigation features to preserve property value and lower insurance costs.
– Consult local property appraisers or tax professionals to understand available relief measures after disasters.

Next Steps

Use the buttons below to to set up a meeting. When starting or operating a business, timing is critical; therefore, if you need assistance with your business venture, it is important that you retain the services of a competent attorney as soon as possible. Should you choose to contact me, we will begin with an introductory conference—via phone—to discuss your situation. Then, should you choose to retain my services, I will prepare and deliver to you for your approval a formal representation agreement. Unless and until I receive the signed representation agreement returned by you, my firm will not have accepted any responsibility for your legal needs and will perform no work on your behalf. Please contact me today to get started.

 
 
 
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— Prof. Chad D. Cummings, CPA, Esq. (emphasis added)


Attorney and CPA

/Meet Chad D. Cummings

Picture of attorney wearing suit and tie

I am an attorney and Certified Public Accountant serving clients throughout Florida and Texas.

Previously, I served in operations and finance with the world’s largest accounting firm (PricewaterhouseCoopers), airline (American Airlines), and bank (JPMorgan Chase & Co.). I have also created and advised a variety of start-up ventures.

I am a member of The Florida Bar and the State Bar of Texas, and I hold active CPA licensure in both of those jurisdictions.

I also hold undergraduate (B.B.A.) and graduate (M.S.) degrees in accounting and taxation, respectively, from one of the premier universities in Texas. I earned my Juris Doctor (J.D.) and Master of Laws (LL.M.) degrees from Florida law schools. I also hold a variety of other accounting, tax, and finance credentials which I apply in my law practice for the benefit of my clients.

My practice emphasizes, but is not limited to, the law as it intersects businesses and their owners. Clients appreciate the confluence of my business acumen from my career before law, my technical accounting and financial knowledge, and the legal insights and expertise I wield as an attorney. I live and work in Naples, Florida and represent clients throughout the great states of Florida and Texas.

If I can be of assistance, please email me at chad@cummings.law, or click here to set up a meeting.