We didn't file for Homestead Exemption last year - what can we do?

Question

We bought a home in 2015 in Florida, which was a primary residence for the previous owners and has been our primary residence since. Our mortgage is through Quicken Loans. We unfortunately didn't realize that we had to fill out paperwork to continue a Homestead Exemption if one was already in place, and found out this week that our property tax from last year was about $1300 higher than estimated; as a result our monthly payment has gone up almost $200 so that we can repay Quicken (for backfilling our escrow).

I've called our county tax collector and appraiser's office, but they've said there's nothing that can be done for last year's exemption (2016), and the best thing we can do is make sure we file for Homestead Exemption this year to avoid excessive taxes again.

Is this something our mortgage company should have filed on our behalf when we closed with them? Can we recover part of this money when we file our taxes this year? Is there anything we can do to help recover from throwing $1300 out the window?

Answer 1

The homestead exemption is your responsibility. You should have filed and should file for next year as soon as possible. What county do you live in? Many have the ability to file online.

If at all possible you should attempt to do your own escrow. Florida is one of those states where you are better off doing it yourself. You should talk to the mortgage company and see if there is any possible way to do your own escrow.

I'll explain more later.

You will have lost money on one years property tax exemption. If you live in Orange county it would amount to about $420, if you live in Palm Beach county, about $515. Its not the end of the world and yes that money is lost. Given that Palm Beach county has some of the highest millage rates, the estimated taxes were off by quite a bit. For reference you can look up the tax history of the property on the appraisers web site for your county.

The exemption is 25K, so you multiply your county's millage rate by 25 to see the value of the exemption.

While escrow increases are a pain short term, you will not lose any excess money paid into escrow. Eventually your escrow payment will be reduced to reflect what is actually owed.

My last escrow experience was in 1999, so its been a while. I found the company I dealt with had outdated software and the CSR did exactly what the computer told them to do. They could initiate an inquiry but were unable to provide any intelligent analysis to the situation.

Here is why I would do away with escrow in Florida:

In Florida property taxes are due on March 31. However, if you pay them in November you get a 4% discount, 3% in December, 2% in January and 1% in February. Guess when your escrow agent will pay the taxes? In March. It won't matter if you have enough in your escrow account.

For perspective, my discount was about $150 on the two properties I own. Not all that significant if you miss out on this for a year or two.

So dummy me called up the escrow company and insisted that they pay the taxes in November to take advantage of the full discount. There was more than enough in the account. They did. Come December the computer sees that my property taxes are due in March and I don't have much left in the account. It did not consider it wasn't until March of next year. That December my escrow payment went up by $800. My mortgage payment almost doubled.

If you are disciplined to save, just do it on your own. In order to do so you will need to have 20% equity in your home.

Answer 2

In general, in most states, there would be nothing that you could do for the 2016 property taxes, though Florida might well have different rules. What you can do, (and you better do it pretty quick), is to file for the Homestead Exemption for your 2017 property taxes. There will soon come a time when it will be too late to file for Homestead Exemptions for 2017.

Note: some governmental/quasi-governmental bodies (e.g. schools, sanitary districts, etc) that collect taxes as part of the property tax bill set their tax rates based on the assessed value of all the properties in their area, and so, some time Real Soon Now, assessed values for property for 2017 will be set in stone so that these bodies can decide on their rates. File the Homestead Exemption paperwork for 2017 NOW instead of putting it on your to-do list and perhaps not getting it done on time.

Answer 3

With the year being over, there is nothing you can do for 2016. File immediately for 2017; the deadline is in March.

More important, get used to the thought that the Homestead exemption is only a part of the 1300$.
In Florida, tax gets recalculated whenever a home changes ownership. As long as you keep the home, the 'Save-Our-Homes' law protects you from tax increases of more than 3% - if the market value goes up 6%, your tax only goes up 3%. After some years, your tax will be considerably lower than the calculated tax - until the owner changes, and then it resets again to the full value.

Exemption only removes 25k$ from the estimated value; that may well be only 200 $ in tax, or maybe 500$ (it's all depending on your location). Read the details on your tax bill to know the exact amount.
The rest up to 1300$ is from the reset, and you are stuck with it, every year.