Florida Taxes

Benjamin Franklin has said, “Nothing is certain but death and tax[es].”   That may be a bit extreme, but certainly, taxes seriously impact our lives and our pocketbooks. Our behavior is influenced by how much and how many taxes we pay. Mine is, anyway.

Sales and Business Taxes

The great news is that the State of Florida does not levy a state personal income tax. It is one of the few states that does not. That is not to say that there are no taxes in Florida. Hardly. One is spared the state personal income tax, but there are many other taxes borne by visitors and residents. These taxes largely offset the savings of the nonexistent personal income tax.

On the other hand, if you come from a state with high real estate taxes (say, somewhere over 3% of the value of the property),  Florida taxes may not seem nearly so burdensome, even in the aggregate.

Nevertheless, the following  “business” taxes are all ultimately paid by the consumer, not the business from which that consumer purchased goods or services. The business only collects those taxes, passing the money along to whatever part of government is responsible for them and then passes these costs to their customers—you and me.  So, when you’re comparing low tax states, be sure to look at the whole tax picture: they all affect your cost of living ….

Florida levies various taxes on businesses and corporations. Excise tax, property tax, tangible property tax, use tax, bed tax, storage tax, admission charge, gasoline tax, and cigarette tax are among the other taxes.  Be sure to take this into account if you’re planning to start a business.

There is a minimum state sales tax rate of 6%. Food and prescription and non-prescription drugs are exempt from taxation. Some non-alcoholic beverages are taxed. Clothing is also taxed. Additionally, each county may levy its own tax which is added to the state tax. As a result, you may be taxed for the same item at different rates, depending on your location. This is quite evident in comparing gasoline prices from county to county.

Most of us like the absence of a state personal income tax. The other taxes are generally viewed as an annoyance or as a cost of living in Florida. Living in Florida requires a number of trade-offs, taxes being one of them. One might say, often with a despairing sigh,  it is the opportunity cost.

Real Estate and Related Taxes

Homeowners whose principal residence is maintained in Florida enjoy various homestead exemptions. The basic exemption is $25,000, which means $25,000 of the assessed value of the home is exempt from property tax. An additional exemption of $25,000 may be applied to the value of the home between $50,000 and $75,000. Hence, an exemption of $50,000 against the assessed value  generally applies to most principal homes.

• The homestead exemption must be applied for at the property appraiser’s office. It is not automatic. Forms can be printed from each county’s website. Applications may be submitted between January 1 and March 1 only.

• There are numerous other exemptions that apply to property, such as a widower’s exemption,  various disability exemptions, and an additional homestead exemption for people over 65, which is income based and applies only to tax millage levied by the county or city.

• Annual increases in the assessed value of the homestead property cannot rise by more than 3% of the prior year’s assessed value or,  if lower, the percentage change in the Consumer Price Index of the prior year.

There is no inheritance tax, but there is an estate tax.

Avoid Taxes Legally

Now, we can look at a few ways to lessen your tax burden. Most of these methods are nationally available, not just here in Florida. If you are in any way doubtful about claiming the following exemptions or credits, check with a tax professional. We are not giving you tax advice, only telling you where you can find tax information.

The  general economic decline of the local economies and the global economy has led to legislation aimed at lessening the tax burden, or at least, postponing some of the burden, in order to inject more money into the economy. This stimulus policy may provide advantages to many who are informed well enough to know how and when to seize these opportunities.

Some of these tax savings and the economic effects on the taxpayer can be considerable.

First-Time Homebuyer

The housing market has dramatically expanded during the past few years. The so-called “housing bubble” has burst and the neighborhoods of SW Florida are dotted with vacant homes, many of which have never been occupied. Prices rose dramatically as the boom grew. Presently, home prices and assessed values have fallen, and the average home has become more affordable (See our Real Estate section).

• This presents a unique opportunity to actually “cash in” on The First-Time Homebuyer Credit. It can present a rewarding opportunity to purchase a new home if you have not owned a home in the past 3 years. A credit of up to $8000 or 10% of the purchase price of a home may be refunded as a credit on your federal tax return.

The timely deadline to file taxes is April 15 of each year. If you have not met the deadline, this does not mean you can no longer claim the credit. If you did not file, filed an extension, or want to amend a previously filed tax return to claim the credit, it is easily and legally possible.

• If you have owned a home for the past 5 years and buy a new one and move into it making it your new permanent residence, you may also qualify for a tax credit of not more than $6500. The Housing and Economic Recovery Act of 2008 introduced this refundable credit. It has since been expanded by the American and Reinvestment Act of 2009 to include a home purchased in the U.S. between April 8, 2008 and April 30,2010. Certain income ceilings are in place and certain restrictions apply.   For the most part, the credit does apply to most first-time home buyers.

Solar Power: Cash in on Sunshine

This specifically includes energy efficient exterior windows,  furnaces, and hot water boilers or water heaters.   These must also comply with Energy Star standards and must be installed in your main home which is in the US.

Alternative Energy Automobiles

Unless extended, 2010 is the last year in which one may buy a new alternative energy vehicle and receive a tax credit. Whether the credit is available depends on a number of factors, one of which is the total number of qualified units a given manufacturer has sold. About com has a  list of eligible vehicles and manufacturers.  Don’t bother looking for Toyota on it, though, because they sold their 2010 quota very early in the year.

You might want to consider a used hybrid if you’re in the market for one of these things. Toyota warrants the Prius hybrid system for 100, 000 miles or 10 years and the conventional power train for 60,000 or five years.  Prices vary , of course, but a 2009 Prius can cost about 70% of the cost for a new 2010. Look on Edmunds.com for cost comparisons while you’re at it.

Also, keep an open mind about this issue. Several compact cars (four or fewer passengers) will cost less to operate over time than the hybrids and will get gas mileage in the lower end of the hybrids’ mpg– 40 mpg or better.  Diesel autos will do even better.  In short, don’t be seduced by a tax credit alone. Too many other factors enter in.