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What Cape Coral, FL Homeowners Should Know About Homestead Exemption


Aerial View of the City

The Florida Homestead Exemption is one of the main benefits of setting up your primary residence in the Sunshine State.

  • The Florida Homestead Exemption allows property owners in the Sunshine State to reduce the taxable value of their homes by a certain amount.
  • Aside from a reduced tax bill, another valuable benefit of the homestead exemption in Florida is that it also protects the homeowner’s assets and safeguards their investments.
  • Homeowners must meet certain specific requirements to qualify for the exemption such as being a permanent Florida resident and residing in the property for a certain period of time.

The homestead exemption accomplishes two things for eligible applicants:

  • The exemption lowers home values for purposes of property assessment in Lee County by as much as $50,000. For example, a property valued at $500,000 will be taxed as if it was worth $450,000. This translates to considerable tax savings for property owners. However, keep in mind that $25,000 of your homestead coverage doesn’t apply to the school taxes portion of your property taxes.
  • It also puts a cap on increases in a property’s assessed following the lesser of 3% rule, or the consumer price index (CPI). This creates substantial savings on properties in which market value far exceeds the assessed value.

There are additional homestead exemption benefits for eligible seniors aged 65 and over whose incomes fall below the mandated income limitation.

These additional benefits can potentially amount to $25,000 for Lee County, FL property owners, and up to a staggering $50,000 for Cape Coral, FL property owners.

The advantages of applying for homestead exemption in Florida

No income tax. As of 2020, Florida is one of few states that don’t collect individual income tax. Moreover, the state constitution prohibits counties and municipalities from collecting individual income tax at local levels. Homeowners who belong to a high-income tax bracket can potentially save thousands of dollars in income taxes each year just by changing residence.

No estate tax. As of 2020, the state does not collect an inheritance tax. This means that your heirs will not have to pay estate tax upon inheriting your Florida property.

And because the Florida Constitution prohibits the collection of the estate tax, the state legislature cannot on its own enact estate tax in conflict with the state constitution. Florida residents would have to vote to amend the state constitution to allow the state legislature to collect an estate tax.

However, keep in mind that Florida residents may still owe estate taxes for properties located out of state. So if you own valuable property in say, Massachusetts or New York, you or your heirs may owe estate tax in that particular state.

Asset protection. If you’re having trouble with creditors or have an ongoing lawsuit, you don’t have to worry about losing your property in Florida. You can safeguard your investments through various asset protection benefits that cover the following:

  • Primary homestead
  • Tenancies by the entirety for real and personal property (for married residents)

In short, creditors can’t lay claim on your Florida home to settle the existing debt. Florida also recognizes tenancies by the entirety, meaning that this rule extends to your spouse’s creditors – as long as you’re not in any way contractually liable for the loan in question.
In other words, sole creditors will not be allowed to seize your property or your spouse’s in the event that one of you cannot repay debts.

However, mortgage lenders are exempt from this rule, since they hold the property as collateral for the mortgage.

Other asset protection in Florida applies to:

  • Assets held in a business entity (provided that the business entity has been properly structured)
  • Life insurance cash value
  • IRAs and annuities

Property tax benefits. Homeowners can take advantage of two separate property tax benefits upon buying a property in the state and declaring that property as their primary homestead.

  • The first benefit comes in the form of an exemption that is applicable to the first $50,000 of the property’s value for tax purposes. However, this exemption doesn’t apply to school district taxes which only receive a $25,000 exemption.
  • The second benefit comes via the Save Our Homes initiative, which puts a cap on annual property assessments. As mentioned earlier, the cap is set at a lesser of 3% or change in CPI, whichever is lower. This means that, for property tax purposes, the assessed value of your primary homestead can’t increase by more than 3% or the change in CPI in the event that the change in CPI is greater than 3% on an annual basis.

For example, the change in the CPI for 2020 is 2.3%, so the assessed value of your primary homestead for this year should not increase past that amount since it’s lower than the 3% cap.

This cap can help you build equity for every year that your primary homestead will be exempt from taxes.​

If you plan to hold onto your Florida residence for a long time, this could also translate to drastic tax savings. This is because property values typically increase over time, until such a point where the assessed value is greater than the price for which you purchased it. Property taxes make up a percentage of this value.

Wealth-building. Becoming a Florida resident gives you access to some of the country’s leading wealth strategists, including tax advisors and estate-planning attorneys.

Who qualifies to file for homestead exemption?

To apply for the Florida Homestead Exemption, you must meet the following criteria:

  • To designate a Florida property as a primary homestead, it must serve as your permanent residence or at least the primary residence of someone you can name as a dependent on your taxes.
  • You must have resided at that particular property on January 1st of the current tax year. For example, if you intend to apply for the homestead exemption on your 2020 taxes, you must have lived on the property on January 1, 2020.
  • You should not have rented the home for more than 30 days in the current calendar year. This is because renting a property for more than 30 days for a span of two consecutive years, or more than six months, would be considered an abandonment of the homestead exemption.

To qualify for additional homestead exemption benefits, which cover up to $50,000 for eligible Cape Coral, FL residents, applicants must meet the following criteria:

  • You must be a primary homeowner of Lee County, FL, and Cape Coral, FL.
  • You must be 65 years of age or older as of January 1 of the current tax year.
  • Your annual adjusted gross household income (AGI), which covers the income of all the individuals living in the home, doesn’t exceed the mandated income limitation based on your tax return. Income limits are adjusted each year.
  • Applications for homestead exemptions are due March 1 of each year although the Lee County Property Appraiser is known to accept applications until early September or 25 days from the date TRIM notices are issued.
  • The first two pages of your tax return or 1099 from your SSA must be included in the application.

If you’re not certain that you meet eligibility, get in touch with your accountant or tax consultant.

How to become a Florida resident

Florida is a warm and welcoming state – there are virtually no barriers to becoming a resident save for a few basic steps. In fact, you might find it more difficult to sever ties with your current place of residence.

According to financial adviser Rick Bloom, homestead applicants can establish their residency by spending at least 183 days a year in Florida.

You can also establish residency in Florida through the following ways:

    • File a Declaration of Domicile – Through this document, you declare that you are a bona fide Florida resident, with every intention of living and maintaining a permanent home in the state.


    • Get a Florida driver’s license – This will provide evidence that you reside in Florida. You will have 30 days from the date you file your domicile to apply for a driver’s license.If you have a driver’s license from another state, you’ll have to surrender it to the Florida Department of Motor Vehicles (FDMV). If you don’t drive, consider getting a non-driver ID card as proof of residence.
    • Have your vehicles registered – Register your cars, motorcycles, boats, and other vehicles that you intend to use in Florida with the FDMV. You’ll also have to make sure that your vehicles are insured within the state.


    • Register as a voter – Once you have your Florida driver’s license or non-driver ID card, you can register as a voter and participate in the next elections. Voter registration can also serve as proof of residence.


    • Open an account with a Florida bank – Or transfer an out-of-state account to a local banking institution.


  • Notify state tax officials – List your new address on forms for tax purposes and notify Social Security of your Florida residence.

Now that you’re a bona fide FL resident, you can finally apply for the homestead exemption.

How to apply for homestead exemption

To apply for a Florida homestead exemption, you must accomplish a form called DR-501. You can accomplish this form through the following ways:

  • Online – Complete DR-501 online and submit it using the e-file option.
  • Mail – Print out the form, fill in the information, and mail a copy to the Lee County Property Appraiser’s Office.
  • Personal appearance – Pay a visit to any of the five in-person service centers throughout the state to accomplish the form.

According to the Cape Coral website, there is no application fee for homestead exemption as of August 2020. Moreover, if your application is successful, the homestead exemption will remain in effect for as long as ownership of the property doesn’t change and you continue to use it as your primary residence.

When applying for homestead exemption, ask yourself the following questions to guide the process:

  • Whose name/s was indicated on the property title on January 1?
  • What are your social security number and your spouse’s?
  • Were you or any of your dependents residing on the property on January 1?
  • Do you have a residence in another state?

Make sure that you have the information available beforehand. Provide accurate information and avoid typographical errors to prevent delays and meet the deadline for the current tax year.

It’s also important to note that the homestead exemption translates to tax savings – it cannot boost the value of your home. If you want to find ways to increase property value with plans of reselling in the future, consult with local real estate experts like the Mike Lombardo Team.

Requirements for homestead exemption

When preparing your application, gather the following documents and information to speed up the process:

  • Proof of the previous residency outside of Florida
  • End date of the previous residency outside Florida
  • Florida driver’s license
  • Non-driver ID card number
  • Evidence you’ve surrendered your driver license from another state
  • Florida registered vehicle license plate number
  • Florida voter registration number
  • Declaration of Domicile
  • Florida residency date
  • Proof of payment of utilities at Florida homestead address
  • The address indicated on your most recent income tax return
  • Name of current Florida employer
  • Recent bank statements
  • Mailing address for checking account
  • Name and location of schools that your dependent children attend

Click here for more information on application requirements.

Other tax exemptions for Cape Coral, FL homeowners

Aside from the homestead exemption, there are many other tax exemptions available to bona fide Florida residents. You may be eligible for the following:

  • Home construction for older family members – You can reduce the value of your total property and get tax savings if you qualify for this exemption. Examples include having in-law apartments added to your Florida homestead. Eligible residents must re-apply for this tax exemption each year.
  • Longtime limited-income exemption for seniors – This exemption is specific to each county. To qualify, bona fide Florida residents must be 65 or older, they must have resided in the state for at least 25 years, and their income must be below a particular threshold. Moreover, if their home is worth $250,000 or less, they may qualify for a 100% exemption.
  • Deployed service members – The tax exemption amount will be calculated based on the total number of days you were deployed as a service member during the current tax year.
  • Disabled veterans – Florida residents age 65 or older and who sustained injuries during combat are eligible for this exemption on top of other tax benefits.
  • Surviving spouses of service members killed during military service – The Fallen Heroes Family Tax Relief Act grants tax exemptions to surviving spouses.
  • Surviving spouses of first responders killed in the line of duty – As with the tax exemption above, spouses of those who’ve died on duty are eligible. Click here for more information.
  • Disabled residents (non-veteran) – Persons living with disabilities such as blindness, etc. may qualify for a $500 tax exemption on their Florida property.

Click here for a more detailed list of various tax exemptions in Florida and the corresponding criteria for eligibility. Qualifying for more than one tax exemption certainly adds up to substantial tax savings, allowing you to better plan and organize your finances.

If you’re not sure which tax exemptions and benefits to apply for, talk to a tax consultant with expertise in Florida’s tax system.


Cape Coral, FL looks out for its residents – more so than any other place in Southwest Florida, as evidenced by the higher homestead tax exemption for qualifying homeowners. On top of that, residents can take advantage of a wide range of Florida tax benefits to secure their future and that of their heirs.

But more than that, Waterfront Wonderland brings you over 400 miles of scenic coastline, 300+ days of sunshine, and the ultimate vacation lifestyle.

Choose a community that takes care of its own. No other city does it better. Learn about Cape Coral, FL real estate, and the coveted waterfront lifestyle here.

Be part of this close-knit community. If you’re convinced that this city should be your next home, get in touch with the Mike Lombardo Team here.

Mike has been helping clients buy and sell homes since 1988, has facilitated millions of dollars worth of real estate transactions. As a nationally ranked agent with local expertise in Southwest Florida, he combines empathy with authority to get the job done.

Whether you’re a seasoned investor or a first-time homebuyer in Cape Coral, FL, the Mike Lombardo team is here to provide access to the MLS as well as devise effective strategies to achieve your goal.

Be part of this close-knit community. If you’re convinced that this city should be your next home, get in touch with the Mike Lombardo Team, the best real estate agent in Cape Coral, Florida.

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