As anywhere in the world, having properties in Miami implies declaring the income obtained by the rent. But, particularly in this city, there are many benefits that an investor can find when accessing the portfolio of homes for sale in Miami. Below, we tell you what types of taxes exist in Miami for real estate, what factors affect when calculating them and what exemptions may apply.
What property taxes in Miami must be paid?
Among the different states that collect taxes in the United States, Florida is one of the few that do not have a state tax. This is different than capital gains taxes.
However, it is local governments that are financed through these levies. Thus, property taxes in this state are collected by the counties and may vary.
Property taxes in Florida are slightly lower than the U.S. average. On average, a homeowner in Florida pays between 1.5% and 2% in annual property tax (Smart Asset, 2020). However, this figure can vary strongly according to the value of the property and the county.
How does paying property taxes work in Miami?
- The first step is the appraisal of the value of the property. Each year, a county officer is responsible for this process. To determine this, it takes into account market variables and movements in the ownership of the property.
- Then, comes the valuation of the property, which is basically the appraised value minus the exemptions. Likewise, there are limitations, such as “Save Our Homes”, which establishes a ceiling of 3% in the annual increase in valuation (Smart Asset, 2020). This exemption does not apply to investment properties.
- Each year in mid-August, homeowners receive the “Truth in Millage” (TRIM) notification with calculated values. If the landlord believes these are not correct, they have 25 days to appeal.
- On the value of properties in Miami, the tax rate is calculated. In Florida, the “mileage rate” system is used. This means that for every $1,000 of property value, one dollar in taxes will be owed.
- However, the actual tax is defined after the exemptions are applied. On average, in Miami-Dade County, for a $268,200 property, a tax rate of 0.97% is paid (Smart Asset, 2020).
It is important to know that rates may vary according to the use of the property. For example, investment properties do not have the exceptions of the primary property. That is, main housing. Thus, if a house is used for vacation rental, the rate can increase.
In addition, foreign investors must also declare the income earned during the year. This applies if you have the E2 visa (which grants work permit and multiple entries and exits). Likewise, it applies for the EB 5 visa (which grants temporary residency). In both cases, it is necessary to declare the income.
What exemptions are there for properties in Miami?
- The “homestead” exemption is the most required (Florida Revenue, 2020). This can be applied up to $ 50,000 dollars of the value of the properties in Miami.
- The widow’s exemption is $500. This applies only to people who have been widowed and who have not remarried.
- The exemption for seniors applies up to $50,000 in the value of the property. In addition, it can only be used by residents over 65 who receive less than $ 20,000.
- On the other hand, people who suffer from a disability also receive exemptions in property taxes.
Buying property in Miami offers very good benefits in terms of taxes. To carry out a purchase operation, it is necessary to give an idea of the costs of it. And, without a doubt, one of those costs is paying taxes. Thus, knowing and calculating what the potential value or rate is, will be essential to find a successful business.
References
H&R Block. (2020). Florida Property Tax. Retrieved from
https://www.hrblock.com/tax-center/filing/states/florida-property-tax/#:~:text=Florida’s 20average 20real 20property 20tax,that 20amount 20varies%20between%%20average%%20property%%20amount%.
State of Florida. (2020). Florida Tax Guide. Retrieved from
https://www.stateofflorida.com/taxes/