Here’s a question that most people don’t ask BUT SHOULD:  What is property tax portability?

A few years back when values were sky rocketing people who have lived in Florida and had a homesteaded property for a long time would not move as they would see their tax bills go through the proverbial roof.  Well, the citizens all got together and amended the Florida Constitution in 2008 which the legislature later codified with FS 193.155.  Unfortunately, this all happened just as home prices plummeted and everyone forgot about it.  Now however prices are on the rise again and we need to be reminded of this little loop hole.  Homesteaded property owners are able to transfer their Save Our Homes (SOH) benefit (up to $500,000) to a new homestead within two years of giving up their previous homestead.  This is called Tax Portability

Here’s how it works.   Let’s say on January 1st 2015 you owned a homesteaded property with an appraised value (“Market Value”) of 162k but an assessed value (“Taxable Value”) of just 104k.  You have 58k (162k-104k) of portable tax savings.  You sell this house in July 2015 and buy another house in August 2015 and establish house #2 as your new homesteaded residence. PLEASE keep in mind at this point that although one can file the Homestead Exemption form up to 1 March 2016 however that form states that on 1 Jan 2016 you were a Homesteaded resident of property #2.  DON’T wait to change your license, voter registration etc.  Also, note that the tax savings are portable for 2 years so you could buy a house in 2016 and use this benefit.  For this example, I will assume you buy a house in 2015 and you apply for a new homestead exemption for house #2 as well as file form DR-501T on time.

Now, we go into the next tax year being 2016.  In August 2016 you will get a Notice of Proposed Property Taxes which will outline the math.  In the first example the market value of house #2 is 300k which is greater than that of house #1 and thus up to 500k in savings is be portable.  The 2016 tax value of house #2 is thus 300k – 58k = 242k.  This amount less 50k exemption amount is your new valuation used to calculate the ad valorem portion of the tax bill.

OK, but what about if one is downsizing to a home of lesser value of say 125k?  If the value of the new home is less than that of the previous homesteaded property then only a percentage of the tax savings is portable.  The new Assessed Value is equal to the (Just Value of New Home / Just Value of Old Home) x Assessed Value of Old Home.  In this scenario the percentage of portable tax savings is then (125k/162k)*104k = 80,247k.  This amount less 50k exemption amount is your new valuation used to calculate the ad valorem portion of the tax bill.

In either case this taxable value of homesteaded properties may only go up after this first year by the prescribed amount being the LESSOR of 3% or the annual change in the Consumer Price Index, whichever is less.

Homeowners may transfer their SOH benefit to a new homestead anywhere in Florida within two years of leaving their former homestead if the new homestead is established by January 1. For example, if you moved during 2014, the exemption remains on your home until December 31, 2014. You have until January 1, 2016 to qualify for a new exemption and port the benefit to a new homestead. This provision applies to all taxes, including school taxes.