If you own a home in Florida for more than a year and later move to a new one, you may save on your property taxes through portability value.
What is portability value? It’s the difference between the assessed and market values on properties that receive a homestead exemption.
In Florida, the first year a residence receives a homestead exemption, the property appraiser assesses it at just or fair market value. After the first year, the assessed value can’t increase more than three percent of the Consumer Price Index (CPI), whichever is lower.
When a home’s market value increases at a greater rate than it was assessed, it results in a Homestead Assessment Difference (HAD) or “Save Our Homes” (SOH) benefit. This cap on the assessed value saves property owners from major tax increases. And if you’re eligible, you can transfer all or part of this one-time credit to another Florida property, even if you bought a new home, through portability.
If your home value declined, the assessed value may increase, but only by the SOH cap. The assessed value will never be more than the just value of your home.
How the “Save Our Homes” Benefit Helps You
“Porting” your SOH benefit lets you lower your tax assessment and the taxes on your new homestead. To become eligible for transfer, you must have qualified for a homestead exemption for the new home within two years of January 1st of the year you moved from the prior home. This is regardless of when you sold your previous home.
Homestead property owners can transfer up to $500,000 of accumulated SOH savings from an existing or prior homestead property to a new one. If the value of the new home is equal to or greater than the old one, the owner may transfer up to $500,000 of value to the new residence. If the new home has a lower value than the old one, you may transfer a percentage of the accumulated benefit to the new one.
For example, when you sell your home you can “port” up to $500,000 to your new home to reduce the tax burden by up to $500,000. If you sell your home for $2 million and have $500,000 of portability and buy a new home for $2.2 million, you are taxed on only $1.7 million ($2.2 million – $500,000).
You must own the home at the time of the challenge. Instead of asking to reduce the market value, you want to increase it to create a bigger gap for the $500,000 portability benefit. So, if my home is assessed at $300,000 and the market value is $500,000, I have $200,000 or 40 percent of portability. If I can show that the market value is actually $800,000, I will increase my “port” to the $500,000 threshold.
Portability Benefit Limits
There are some limits. Your portability benefits may be limited if you split the benefit among multiple homeowners.
Also, Florida homeowners can transfer their SOH benefits within two years of leaving their former Florida residences if they establish their new homesteads by January 1st.
So, if you moved in March 2016, you had until January 1, 2018 to qualify for a new exemption and transfer your benefits to the new home.
You also don’t have to sell your home to qualify for portability — you just need to abandon or “give up” the exemption and SOH benefit on your existing homestead. Once you have done so, you may transfer your SOH benefits to a newly purchased home or any property you already own.
If you received a homestead exemption, but didn’t apply for portability within two consecutive years, you can apply at a future date. The HAD difference / SOH benefit from the year you abandon the homestead exemption will apply to the assessed value of the new home in the year the appraiser first approves portability. However, you won’t receive property tax refunds for prior years.
How Do I Get My Portability?
You need to apply for a homestead exemption with form DR-501 and then file form DR- 501T for the Transfer of Homestead Assessment Difference for the portability. The filing deadline for both is March 1st.
Complete all forms and applications required for the exemption and file them with your county property appraiser. If the appraiser denies your application, you may petition the county’s value adjustment board.
If you sell, foreclose, or transfer the title to a homestead property the SOH cap protects, it will lose the benefit and be subject to market value assessment on January 1st of the next year.
You can also abandon your current homestead even if it continues to be your primary residence. To do so, you must write to the property appraiser in the county where the homestead is located by March 1st and then file a new homestead and portability application.
To avoid any penalties, notify your county property appraiser if your homestead status has changed.
If you need help porting your homestead property value, contact us today.