Florida’s reputation as a tax-friendly place to retire is based on one line of its constitution. But no income tax does not mean no taxes. Retirees here still pay sales tax, property tax and federal income tax, and the property tax rules are where most of the planning happens.
No state income tax, by constitution
Article VII, Section 5 of the Florida Constitution says that no tax upon estates or inheritances, or upon the income of natural persons who are residents or citizens of the state, may be levied by the state in excess of the amounts that may be credited or deducted against a similar federal or state tax. In practice, Florida does not tax wages, pensions, Social Security or investment income of individual residents, and it has no state estate or inheritance tax of its own.
Federal taxes are unaffected. Your Social Security, pension and IRA withdrawals are taxed by the IRS exactly as they would be anywhere else in the country.
Sales tax
Section 212.05 of the Florida Statutes sets the state sales tax at 6 percent of the sales price of tangible personal property sold at retail. Section 212.055 also authorizes counties to levy discretionary sales surtaxes on top of the state rate, each with its own rules and, in some cases, voter approval, so the rate you see at the register depends on where you shop. For a retiree who spends rather than earns, sales tax is one of the larger everyday state taxes, so the local rate is worth checking when you compare counties.
Property tax is local
Property taxes are set by counties, cities, school boards and special districts, and they are where Florida’s homeowner protections matter most. The Florida Department of Revenue explains two key benefits for a primary home, called a homestead:
- The homestead exemption, which can reduce a home’s taxable value by as much as $50,000. The first $25,000 applies to all property taxes, including school taxes; the additional amount of up to $25,000 applies to assessed value over $50,000 and only to non-school taxes.
- The Save Our Homes limitation, which caps the yearly increase in a homestead’s assessed value at 3 percent or the change in the Consumer Price Index, whichever is less, after the first year.
The details, including deadlines and how to move the benefit to a new home, are in The Florida Homestead Exemption: How It Works, How to Apply and How Save Our Homes Protects You.
Extra help for owners 65 and older
The Department of Revenue’s guide for people 65 or older describes two optional exemptions that counties and cities may adopt by ordinance:
| Benefit | Who may qualify | Statute |
|---|---|---|
| Additional homestead exemption of up to $50,000 | Owners 65 or older with household income under the annually adjusted limit | s. 196.075(2), F.S. |
| Exemption equal to the assessed value | Owners 65 or older, just value under $250,000, permanent residence for at least 25 years, income under the limit | s. 196.075(2), F.S. |
| $5,000 exemption | Widows, widowers, blind persons and totally and permanently disabled residents | s. 196.202, F.S. |
Because the senior exemptions are local options, the guide tells residents to ask their county property appraiser whether they are available. The income limit started at $20,000 and is adjusted each year for inflation. Veterans 65 or older with a service-connected disability may also receive a percentage discount on homestead taxes.
Tip: Every exemption application goes to the property appraiser in the county where the home is located, not to the state. Mark March 1 on your calendar: it is the filing deadline for the homestead exemption.
What changes when you sell or move
The Save Our Homes benefit belongs to the homestead, not to you. If ownership changes through a sale, foreclosure or transfer of title, the Department of Revenue says the property loses the benefit and is reassessed at full market value the following January 1. Moving within Florida does not mean starting over, though: portability lets most owners transfer some or all of their accumulated benefit to a new Florida homestead, up to $500,000 under section 193.155.
Why your first bill may be higher than the seller’s
The Department of Revenue warns that many first-time Florida homeowners are surprised when their tax bill is higher than the previous owner’s. When a property changes hands, the appraiser removes the old exemptions and reassesses the home at market value as of the next January 1. The seller’s homestead and Save Our Homes benefit stay with the property only for the rest of the calendar year of the sale. Your own Save Our Homes cap begins the year after your homestead exemption takes effect. The property appraiser mails a Notice of Proposed Property Taxes each August, tax bills go out in late October or November, and they are due by the following March 31.
Taxes are only part of the bill
Low taxes can be offset by other costs of owning a Florida home, especially insurance. Read Hurricane Insurance in Florida: Deductibles, Citizens and Free Wind Inspections Explained and The Cost of Living in Florida for Retirees: What Is Lower, What Is Higher and How to Budget before you decide that a low property tax bill makes a place affordable.
A short checklist
- Establish residency and keep proof; see Moving to Florida: A Residency Checklist for Retirees.
- File for homestead with the county property appraiser by March 1.
- Ask the appraiser about senior, widow and veteran exemptions.
- Check the local sales surtax and millage rates in the county you are considering.
- Keep filing federal returns as before.