How Do Property Taxes Work on Luxury Homes?

Property taxes on luxury homes are levied by local governments — typically county governments — based on the assessed value of the property, which may or may not equal the market value depending on the jurisdiction's assessment methodology.

Assessment methodology: Different states and counties assess property for tax purposes using different methodologies. Some jurisdictions assess at 100% of market value; others assess at a fraction of market value. Understanding the specific assessment methodology in your target market is essential for accurately projecting the property tax liability.

Millage rates: Property taxes are calculated by applying a millage rate (expressed in mills — thousandths of a dollar) to the assessed value. Millage rates vary by jurisdiction and include levies for the county, municipality, school district, and various special taxing districts. Total millage rates for luxury properties in South Florida typically range from 15 to 25 mills — meaning a $10 million property at 100% assessment might carry an annual tax bill of $150,000 to $250,000.

Florida homestead exemption: Florida residents who use a property as their primary residence are eligible for the homestead exemption — which reduces the assessed value by $50,000 and caps annual assessment increases at 3% (the 'Save Our Homes' cap). This exemption does not apply to non-primary residences or non-Florida residents.

Portability: Florida homestead owners who move their primary residence can 'port' the accumulated Save Our Homes savings to a new Florida homestead — reducing the taxable value on the new property. Portability can save longtime Florida residents significant amounts in property taxes when upgrading or relocating their primary residence.