By: Felipe Mavromatis, Esquire
One often overlooked “asset” in a Florida divorce proceeding is the portability of one’s homestead exemption and the tremendous tax savings in connection with it. For readers with short attention spans–yes the tax savings is portable and yes, you can divide it with your soon to be ex. Important to note is that you do not have to sell your marital home to qualify for portability, all that is required is that you and your ex abandon your existing homestead.
After you abandon your existing homestead, you can transfer it to either a newly purchased home or any property you already own.
To better understand the concept of portability, it is necessary to first understand the basic tenets of homestead in Florida. With limited exception, homestead protection is available only on a married couple’s primary home, albeit unmarried couples may also claim homestead on their primary residence. Florida courts have stated that a husband and wife of an “intact marriage” cannot maintain separate legal residences for homestead exemption purposes. The issue of whether the marriage continues to be “intact” is complicated. Suffice it to say, parties who are separated, but not yet divorced, MAY be able to claim homestead on their separate properties if certain conditions are met.
Written into the Florida Constitution, the Florida Homestead Exemption provides virtually absolute protection from forced sale of your home to meet the demands of creditors with four main exceptions:
- Property taxes, state tax, and IRS tax liens;
- Mechanics liens for goods and services provided to build. repair, or improve the property;
- Creditors and liens that pre-date the home being homesteaded; such as condominium and mandatory homeowner association liens; and
- Liens given to secure the purchase of the home such as a mortgage or home equity loan.
To qualify for protection, you must:
- be a resident of Florida;
- own and occupy the property as your permanent residence (if the property is owned by a corporation or a limited liability company, for example, it will not qualify for Florida homestead protection); and
- hold title or beneficial interest to the property.
What is Portability?
Florida law provides for lower property tax assessments on homestead property. The first year a primary residence receives a homestead exemption, the property appraiser assesses it at just value. The Save Our Homes Amendment of the Florida Constitution, prevents the assessed value of the homesteaded property from increasing more than 3% per year or, exceeding the percent change in the Consumer Price Index, whichever is lower. A homesteaded owner may transfer up to $500,000 of the “Save Our Homes” benefit from one Florida home to the next.
Show me the numbers!
The Save Our Homes “savings” is the difference in Market Value and Assessed Value. In other words, the amount that has been “protected” or “untaxed” due to the benefit of the Save Our Homes assessment limitation or “cap.”
Now, by way of example, imagine a homesteaded property as follows:
2017 Market Value (Total Just Value) from prior homestead of: $250,000
(minus)
2017 Assessed Value from prior homestead of: $150,000
(equals)
A Portable Amount of: $100,000
What happens in a divorce?
Given the example above, if both parties anticipate purchasing a home, they can equally divide the portability with each spouse retaining portability of $50,000. In order to do this however, both husband and wife must abandon the previous homestead before the assessment limitation can be ported. Florida law allows a husband and wife to assign their port differences over to each other using form DR-501TS. Visit the Florida Department of Revenue website for the form.
During divorce settlement negotiations, homestead portability may sweeten the pot for a spouse on the edge of settlement–this is an important, but often overlooked “asset.”
If you would like to learn more, contact one of our experienced attorneys at 407-757-2883.
