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June 26th, 2007 10:05 AM by Ron Mastrodonato

Florida Legislature says it has reached agreement on property tax reform

TALLAHASSEE, Fla. – June 11, 2007 – We have a deal. Senate President Ken Pruitt (R-Port St. Lucie) and House Speaker Marco Rubio (R-Miami) announced that they’ve reached an agreement to cut property taxes in Florida.

It’s a complicated, two-step formula that would offer moderate relief this year and greater relief next year. Homesteaded owners win most, but commercial interests also benefit. Details will be discussed starting tomorrow, the first day of the Florida Legislature’s special session, with a vote possible before the scheduled end on June 22.

Step 1

The two steps operate independently and cut taxes in different ways. Step one can be accomplished immediately if approved by the Legislature and signed by Gov. Charlie Crist. Under this step, all cities and counties will be required to cut taxes in the upcoming 2007-2008 fiscal year to the 2006-2007 revenue levels. After determining that level, each local government will then be required to make an additional cut of 3 percent, 5 percent, 7 percent or 9 percent.

The specific amount each local government must cut depends on a formula. Rubio and Pruitt say they’ll calculate property taxes over five years and use a statewide average of increases as a baseline. They will then compare each local property tax increase to that baseline number. Local governments on the high side must institute an additional 7 to 9 percent decrease; those on the low side must cut by 3 to 5 percent. Special taxing districts and fiscally limited cities and counties will be required to cut taxes to the 2006-2007 revenue levels and make an additional cut of 3 percent.

Finally, local governments may increase tax revenues over time but only by an amount based on local increases in personal income and new construction.

However, local governments would be able to override the proposed cut and caps, and the method – supermajority vote, referendum, etc. – for override approval would depend on the magnitude of the change.

Step 2

To amend the Constitution, voters will be asked to replace “Save Our Homes” and the $25,000 homestead exemption with a new “super exemption.” This would give most homeowners increased savings, and also open the market to anyone seeking homestead property, including new residents and first-time buyers who now start from scratch and pay property taxes on the full value of the property their first year. Passage would require approval from 60 percent of voters.

The exemption has two tiers:

Tier 1: Homestead property will receive an exemption of 75 percent of the first $200,000 in value of the home; or, put another way, a taxable value of $50,000. The minimum exemption is $50,000 per homestead.

Tier 2: In addition to Tier 1, homestead property will obtain another 15 percent exemption for the next $300,000 in value. A $350,000 property, for example, would have a taxable value of $177,500 – $50,000 on the first $200,000, and $127,000 on the additional $150,000.

If a homeowner would benefit more from the existing Save Our Homes exemption – generally long-term owners – he will be able allowed to retain that benefit until he sells the home. Legislators have also agreed to address issues such as relief for low-income elderly taxpayers, incentives for affordable housing and tax reform for “working waterfronts” and small businesses. Other details need to be worked out.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

 

HUD brings some clarity to fair housing issues

WASHINGTON – June 11, 2007 – Multifamily housing must be accessible to the disabled – but what does that mean?

The U.S. Department of Housing and Urban Development’s (HUD) accessibility guidelines have been open to interpretation; but last week, HUD assured builders that they comply with all requirements if they follow the 2006 edition of the International Building Code and the 2003 edition of the International Code Council (ICC) A117.1 Accessible and Usable Buildings and Facilities. If the code is followed, HUD considers it a “safe harbor.”

“This latest endorsement is a result of HUD and NAHB’s ongoing commitment to providing accessible housing,” said and a home builder from El Segundo, Calif. “By building to these codes, multifamily builders are assured they are providing accessible housing while complying with HUD’s Fair Housing Accessibility Guidelines,” says Brian Catalde, president of the National Association of Home Builders (NAHB).

NAHB wanted the fair housing accessibility requirements within the building code because HUD’s guidelines were unclear and, many times, unenforceable by state and local jurisdictions.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

 

What to know about using IRA money for real estate

NEW YORK – June 11, 2007 – Self-directed IRAs give investors lots more options than do traditional company-sponsored retirement plans, including the option of investing in real estate.

For many people, real estate is the alternative investment of choice, according to Tom Anderson, president of PENSCO Trust, a custodial firm specializing in self-directed IRAs.

“The slowdown in the real estate market really hasn’t affected our business because we’re talking about investment properties versus personal residences, and people are taking advantage of down market opportunities,” he says.

The rules and regulations for investing an IRA in real estate are complex, and failure to pay attention will result in substantial taxes and penalties, experts say.

Accountant Ed Slott, founder of the IRAhelp.com Web site, offers these suggestions:

• Set up a separate IRA for real estate investments. Even if only a small portion of the IRA is used for real estate, the IRS could penalize the entire balance in a prohibited transaction.

• Check the investment scenario with custodians and other professionals who have experience in these transactions and can spot red flags.

• If possible, choose to invest in a Roth IRA. The money in the Roth has already been taxed and any distributions, including capital gains on the property, are generally tax-free.

Source: MarketWatch, Marla Brill, (06/06/07)

Posted in:General
Posted by Ron Mastrodonato on June 26th, 2007 10:05 AM

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