Homestead Exemption:

A look at a worthwhile possibility for some of us.

In modern times we are not migrating westward in a covered wagon to homestead and farm 160 acres of free public land on a land grant. What we are really trying to do in modern homesteading is to find a way to cut our property taxes and cap future increases of them. Contemporary homesteading can be a great way to do that, as long as you and your property qualify.

… but let’s not forget!

Another aspect of modern homesteading can be embracing a more self sufficient lifestyle.

Here are some great tips from Modern Homesteading Lifestyle expert Samantha Greene.

Modern Homesteading Ideas – The Top 10": https://homesteadingtips101.com/10-modern-homesteading-ideas/

Homestead Acts:

Before looking at homesteads in modern times it is important to look at how and why they came about back in the 1800’s. Back then there were millions of acres of available government and public land, especially out west. The federal government wanted to open up individual land ownership opportunities and the original Homestead Act came into place in 1862. It was the first of several additional amendments to follow. Over time, homestead land grants were put into place to allow anywhere from 160 acres up to 640 acres, depending on the location and applicable laws at the time. Common law land grant homesteading no longer exists to my knowledge, but over 20 states have enacted homestead laws of their own for other purposes.

Modern homesteads:

Homestead designation at the state level is defined by the individual state, of course. Texas and Florida are notable examples. I have a friend who’s house in Florida is approved as a homestead and provides a nice break on property taxes. Florida currently allows up to $50,000 to be deducted from the assessed value of the property, subject to certain conditions, including but not limited to:

The residence must be a permanent residence.
The first $25,000 is exempt.
The second $25,000 applies to assessed values between $50,000 and $75,000.
There is no benefit on the school tax.
After receiving the homestead exemption in year one, any annual increase in assessed value is capped at 3%, or the percentage increase in the Consumer Price Index (CPI), whichever is lower.
If the property is sold, the homestead exemption is removed.
If correctly done and allowed by law, a homestead may be applied for again at the new residence (called porting) and all or a portion of the capped value may be allowed for the new residence.
Spouses cannot claim a homestead exemption on another property.

Homestead laws must be fully complied with to get approved and remain in good standing. The laws vary by state and location. The conditions listed above are not all that apply in Florida, so an applicant must conduct a full review of all of the requirements necessary to successfully apply. Once approved, there are also compliance requirements to remain within the allowed exemption.

Homestead application:

The Florida application for homestead and related tax exemptions is about 3 1/2 pages long and besides the usual fill-in’s seen on almost any legal application, it focuses on the following:

Applicant(s) % of ownership of the property.
Date of permanent residency.
Proof of permanent residency.
Address and parcel number.
Type of deed.

This is a link to the Florida Homestead Application as of the date of this post: https://floridarevenue.com/property/Documents/dr501.pdf

Investing in homesteaded property:

Back when I was doing land development in the Pacific Northwest I worked a deal on a family farm that was in a homestead. It had been in the same family since the mid to late 1800’s and was 160 surveyed acres. The deal did not go through since we could not agree on price, but I did some due diligence while negotiating anyway.

I didn’t find any problems with my plans for future improvements on the property for a residential project, but I did realize that the favored tax status of the farm as a homestead was going to go away if the transaction closed. Also, as an investor not permanently residing on the property, I could not successfully apply for the homestead exemption as a new owner.

I guess the moral of the story is that if an investor (as a non-resident) is looking to buy homesteaded land, he/she will probably be looking at being excluded from homesteading and will likely see a resulting higher property tax bill after removal. I did not find any land use limitations in this case.

What does homestead mean?

As we have seen, the original goals of homesteading was to provide land grants to settlers permanently moving westward and permanently occupying the granted land. That is not the goal in modern times. In my state it is an opportunity for the primary residential homeowner to apply for property tax exemptions and cap limitations on future property tax increases. Different, but still worth looking into if your state allows it and you qualify for the exemption.

Contact me at: ldr@landdevelopmentrealities.com