As property values continue to increase, the subject of homestead portability is becoming more prevalent. Florida law permits one to sell their homestead and transfer their Homestead Assessment Difference (explained hereafter) to their new homestead.
On January 1st of each year, property is assessed by the county property appraiser. One of the primary benefits of homesteading property is that it caps the annual increase to the lower of (a) 3% of the assessed value from the previous year, or (b) the percentage change in CPI (Consumer Price Index) for all Urban Consumers. The Market (Just) Value of Homestead Property increases as market conditions dictate, but increases in Assessed Value are limited for homestead property. As such, over time, with respect to properly homesteaded property, the difference between the Market (Just) Value and the Assessed Value widens in an improving market. This difference is referred to as the Homestead Assessment Difference.
Prior to 2008, large Homestead Assessment Differences discouraged people to buy new homes in Florida due to fear of losing their accumulated tax savings. That all changed in 2008 with an amendment to the Florida Constitution allowing homesteaders to “port” or transfer their Homestead Assessment Difference to a newly acquired Florida homestead.
This is how it works. If you move from one homestead to another homestead within the state of Florida, you have the ability to “port” or transfer the Homestead Assessment Difference to your new homestead. To do so, one must (a) apply for their new homestead within 2 years of January 1 of the year in which they abandoned or sold their previous homestead, AND (b) fill out and file the Transfer of Homestead Assessment Difference (Form DR-501T). It is important to note that this is NOT done automatically for you. You must fill out and submit Form DR-501T in order to port your Homestead Assessment Difference, and do so within the required period of time.
Calculating and applying the Homestead Assessment Difference to the new homestead can be a bit tricky, and the analysis is different depending on if one is “upsizing” versus “downsizing.” Some useful sources to better understand the process can be found at:
Sarasota County Property Appraiser: “Portability: FAQs”
Florida Department of Revenue: “Save our Homes Assessment Limitation and Portability Transfer”
Florida Statute 193.155: “Homestead Assessments”
As always, should you have any questions regarding homestead porting, we urge you to reach out to your real estate attorney. Remember, this is not done automatically and there are time limitations. But the tax savings can be quite significant from day one if performed timely and properly.
Berlin Patten Ebling, PLLC
Article Authored by Evan Berlin, Esq. email@example.com
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