Moving within Florida – Tax Benefits of Portability

·3 min read
Portability - how it works for estate tax - Batson Nolan

By way of background, the homestead tax benefit in Florida has two primary aspects, which are: (i) a small standard annual deduction in the assessed value of the homestead property and (ii) an annual cap on the growth or increase in the assessed value (the “Cap Benefit”).

The assessed value of the homestead property is how real estate taxes are determined in Florida.

The Cap Benefit is the most significant of the homestead tax benefits, as it limits the annual increases in the assessed value by the lesser of the annual change in the Consumer Price Index (CPI) or three percent (3%).

Over time, as a result of the Cap Benefit, the assessed value of the homestead property can be thousands or hundreds of thousands below the current market value of the homestead property.

For more information on Florida’s homestead tax benefits see Florida’s Homestead Tax Benefits.

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Under Florida law, as of the date of this post, a Florida homestead property owner can now port or transfer over a portion of the Cap Benefit to a newly acquired Florida homestead.

This porting or transferring of the Cap Benefit is referred to as ‘Portability.’

In order to utilize the Portability for the Cap Benefit, there is a specific homestead Portability form that must be completed within a three year time period from the change in the homestead properties.

Portability Example: If a homestead property is sold or transferred in calendar year 2022, the homestead tax benefits, including the Cap Benefit, remains with that property until December 31, 2022.

This means the homestead property owner has until January 1, 2025, in order to complete the Portability process for the new homestead property.

Portability FAQs:

  • What is the maximum amount of the Cap Benefit that can be transferred under Portability?
    • $500,000 of value (difference between the assessed value and current market value).
  • How is the Cap Benefit that is transferred under Portability impacted by an upsizing or downsizing of the current market value of the new homestead property?
    • Upsizing – If the market value of the new homestead property is greater than or equal to the previous homestead property’s market value, the entire Cap Benefit can be transferred, but up to the $500,000 limit.
    • Downsizing – If the market value of the new homestead property is less than the previous homestead property’s market value, then only a percentage of the accumulated Cap Benefit can be transferred, again, subject to the $500,000 limit. By way of example, moving from a homestead property with a market value of $300,000 down to one with a market value of $180,000 would result in 60% of the Cap Benefit being eligible under Portability ($180,000 divided by $300,000 = 60%).
  • When is the deadline to apply for Portability?
    • The application must be submitted by March 1st of the year Portability is sought.

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