Preventing Homestead Fraud in the Sunshine State

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There are many financial benefits to having a homestead exemption on a property. In the state of Florida, property owners who declare a home to be their primary residence are eligible to receive a homestead exemption or deduction off a property’s assessed value up to $50,000. The first $25,000 applies to all property taxes and school district taxes. The additional $25,000 exemption applies to the assessed value of a property between $50,000 and $75,000 and non-school taxes. A homestead exemption can result in hundreds of dollars in tax savings.

Many property owners qualify for even bigger savings under the Save Our Homes state constitutional amendment, which was enacted in 1995. The law states that the taxable value of a homestead property cannot increase by more than three percent per year, even if the market value rises. The Save Our Homes cap sometimes creates tax disparities between similar residences, where some homeowners incur tax bills that are double or triple that of a homeowner, who secured a low rate. This disproportion can motivate some homeowners to seek a homestead exemption on properties that aren’t eligible, including rental properties or second homes, opening the door wide for fraudulent claims. The Miami Herald reports on a successful fraud solution that Miami-Dade County law enforcement has implemented, recently identifying $6.2 million in violations over a two-month period.

In order to track down and prevent homestead exemption fraud from occurring in Miami-Dade County, additional police detectives have been deployed in nine cities including Coral Gables, Hialeah, Key Biscayne, Miami, Miami Gardens, Pinecrest, South Miami, Sweetwater and West Miami. The extra manpower enabled the identification of additional ineligible property owners, generating more property-tax revenue for the cities. Homeowners, who have illegally obtained homestead exemptions, lose the deduction and have to pay back taxes, penalties and interest. (That’s a big chunk of change.) If the obligations are not paid within 30 days, a lien is placed on the property.

Kudos to the Miami-Dade Property Appraiser, who has made it easier for the public to report homestead fraud by adding an online form on its website. Miami’s commissioner should also be commended for encouraging other municipalities to hire additional investigators at a cost of between $50,000 and $100,000 per year. This seems like a small cost to incur as compared to millions of dollars in revenue that can be recovered.

Source: Today’s ”Fraud of the Day” is based on the article titled, ”Police Task Force on Homestead Fraud Reaps Results,” written by Martha Brannigan and published in the Miami Herald on October 11, 2013.

MIAMI – Deploying police detectives from nine local cities to bolster homestead fraud investigations in Miami-Dade County is reaping fast results, according to the property appraiser.

Miami-Dade Property Appraiser Carlos Lopez-Cantera said with the extra police muscle, $6.2 million in violations were identified across Miami-Dade for September and October, compared with $3 million during June and July before the task force got started.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.