Renting Away the Florida Homestead Exemption

As most Florida homeowners know, the Homestead Tax Exemption (hereinafter the “Exemption”) is a valuable savings tool. The Exemption allows for a $50,000.00 reduction of a property’s assessed value and includes the Save Our Homes cap that limits annual increases in assessed value of real property to 3%. However, today many homeowners are attempting to generate additional cashflows and do not realize the strict requirements to maintain the Exemption. For example, real property is eligible for the Exemption only if it is a permanent residence. Florida law states this must be a person’s permanent home, and when the person is absent, he or she intends on returning to the permanent residence. A person can only have one permanent residence and it is presumed to continue until it is demonstrated a change has occurred. Homeowners can rent homestead property, but may abandon the Exemption if the property is entirely rented or “substantially” rented for more than 30 days per calendar year, for two consecutive years. And therein lies a problem… Many homeowners fail to realize that renting the entire permanent residence on a short-term AIRBNB snowbird basis, and/or only renting out a portion of the property, may constitute a change resulting in the removal of the Exemption or its modification resulting in a higher property value tax assessment.

Note this does not mean if you only rent out a room you will lose the Exemption. Each county property appraiser has its own different policies and procedures for short-term and long-term rentals of homesteaded real property. Homeowners have three options: 1) do nothing (not recommended!); 2) remove the homestead exemption (not recommended!); and 3) familiarizing yourself with the rules and regulations of short and long term homestead rentals by contacting your local county property appraiser’s office and other related tax agencies (best option!). All three options have serious consequences, because if it is determined that a property was not entitled to a homestead exemption, but was granted a homestead exemption from ad valorem taxes, it shall be the duty of the local property appraiser to collect said previously exempted taxes against the property, plus a penalty of 50 percent of the unpaid taxes for each year and 15 percent interest per annum.

Before you decide to rent out your homestead property seasonally, I strongly suggest you contact your local real estate attorney, insurance agent and accountant to discuss your options and their potential ramifications.

Sincerely,
Berlin Patten Ebling, PLLC

Article Authored by Michael E. Schuchat, Esq. mschuchat@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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