Save Our Homes Pitfalls: How to Avoid Losing the 3% Homestead Cap


By now, most Florideans have figured out that the most valuable benefit of the homestead exemption is not the $50,000 exemption itself, but the 3% cap on the annual increases in the assessment of their homestead property.  Conversely, the worst part of losing a homestead exemption is receiving a tax bill the next year that is based on the full fair market value of your property.  Unfortunately, the law regarding when a property loses the Save Our Homes Amendment ["SOHA"] cap and must be reassessed at just value is a bit convoluted.  This article will address some of the most common reasons for losing the SOHA cap.

What constitutes a “change of ownership”?

Florida Statute 193.155(3)(a) provides that the SOHA cap is lost, and the property must be reassessed at just value as of January 1st of the year following a change of ownership.  A “change of ownership” is defined as “any sale, foreclosure, or transfer of legal title or beneficial title in equity to any person, except as provided in this subsection.”  Thus, obviously the SOHA cap is lost when a property is sold to a completely new owner.  However, because “change of ownership” is defined rather broadly, there are many other situations that could trigger a loss of the SOHA cap, even though the average person might not think of the situation as a change of ownership.

Loss of Cap on Death of Homestead Recipient

One common misconception is the belief that the SOHA tax savings are inheritable.  When a property owner passes away, the heirs may expect that the taxes on the property will continue to be based on their parents’ or grandparents’ capped value.  However, that is usually not the case.  If a property owner dies leaving a spouse or minor children, the transfer of the property to the spouse or minor children is not considered a “change of ownership.”   Likewise, the statute includes an exception for property that is transferred to someone who was legally or naturally dependent on the deceased owner and who is living on the property. However, if the property is inherited by adult children or other beneficiaries, the property will generally be reassessed at its full just value the next tax year.

Removal of Co-Owner from Title

Another situation that sometimes catches taxpayers by surprise is when they lose the SOHA cap because they removed a co-owner from the title to their property.  Many people who own property jointly with others would probably not consider the removal of a co-owner to be a change in ownership.  However, in Attorney General Opinion 2002-28, the Attorney General advised the Property Appraisers that removal of one joint owner triggers reassessment of the entire property at its just value as of January 1st of the following tax year.

Addition of Co-Owner to Title

Previously, the Attorney General had also advised that the addition of a co-owner to the title of homestead property constituted a change of ownership.  The legislature has since amended the statute to clarify that the addition of a co-owner will not necessarily be considered a change of ownership, unless that new co-owner applies for their own homestead exemption on the property.  For example, if Grandpa Joe added his granddaughter Susie to the title of his homestead property, the property would continue to be assessed based on its capped value.  However, if Susie went down to the Property Appraiser’s office and applied for her own homestead exemption on the property, Grandpa Joe would get a nasty surprise when the next year’s tax bill arrived, as the property would be reassessed at its just value.

The reason for this is, I believe, based on the basic notion that the SOHA tax savings was not intended to be inheritable.  Thus, while a taxpayer can add a relative or other person to their title for estate planning or other purposes without losing the SOHA cap, they cannot use estate planning devices to pass down the tax savings to their heirs.  In the above example, if Grandpa Joe passed away and Susie decided to live in the property, she could apply for her own homestead exemption, but the property would be reassessed at just value and the SOHA cap would apply to that new base year value.

Homestead Portability: Transferring Your Homestead Cap to Your New Home


In Florida, the Save Our Homes Amendment to the Florida Constitution prevents the assessed value of homestead property from increasing more than 3% per year, or the percent change in the Consumer Price Index, whichever is lower.  While the tax savings from the Save Our Homes Amendment has no doubt helped many homeowners to stay in their homes even when values were rising, it also tended to discourage homeowners from moving to a new residence, for fear of giving up all of their accumulated property tax savings.  In 2008, Florida voters attempted to change that by amending the Florida Constitution to allow for “portability” of their accumulated homestead exemption tax savings.  This article will explain the basics of how to “port” your Save Our Homes tax savings to your new residence, and will address some of the more complicated situations that can arise, particularly when more than one owner is involved.

Portability Basics

The rules regarding portability are set forth in Florida Statute 193.155(8).  Essentially, a homeowner may “port” their Save Our Homes tax benefits to their new home as long as they establish their new homestead within 2 years of abandoning their previous homestead.  If the new homestead is more valuable than the old homestead, the homeowner may port up to $500,000 of capped value to their new homestead.  For example, suppose your old home was worth $350,000, but was assessed at only $250,000 due to the Save Our Homes Amendment (a $100,000 cap differential).  If you were to move to a new home worth $500,000, that home would be assessed at no more than $400,000 in the first year, with subsequent increases limited to 3% per year, or the percent change in the CPI.  If you move to a less valuable home, the amount of cap differential that you may port will be limited to your old home’s assessed value divided by its just value.  For example, if your old home was worth $500,000, but was assessed at $400,000, and you move to a less valuable home, the new home will be assessed at 80% of its just value the first year, as long as the cap differential does not exceed $500,000.

In order to port Save Our Homes benefits, when filing an application for a new homestead exemption, you must also file Form DR-501T, for Transfer of Homestead Assessment Difference by March 1st of the year you intend to establish a new homestead.

Portability When Combining Households

If two people who each have their own homestead decide to acquire a new homestead together, the Property Appraiser will use whichever prior homestead would result in the highest cap differential, and thus the highest tax savings.  However, once again, the cap differential may not exceed $500,000.

Portability When Abandoning Joint Property

When joint owners abandon homestead property and acquire new, separate homestead properties, the cap differential that they are allowed to port is calculated as described above.  However, the cap differential is then divided by either the number of owners of the prior homestead or, in the case of property owned as tenants in common, by each owner’s proportionate interest in the prior homestead.  For example, if two joint owners would be allowed to port a $100,000 cap differential to the same new residence, if they move to separate new residences, they would each be permitted to port $50,000.

Challenging Portability Decisions

A taxpayer may not challenge the assessment of their prior homestead property in a prior year, as that would be contrary to the requirement in section 194.171, Fla. Stat. that all tax assessment challenges be brought within 60 days of the certification of the tax roll or the decision of the VAB.  However, pursuant to Florida Statute 194.011(6), if a taxpayer disagrees with the Property Appraiser’s determination of their entitlement to portability or the amount they are allowed to port, they can file a Form DR-486PORT petition to the Value Adjustment Board where their new home is located.  The VAB where the new residence is located will then submit a notice to the VAB of the county in which the taxpayer previously resided and that VAB will hear the petition and render a decision.  The decision of the VAB in the previous county will be submitted to the VAB in the new county, which will consider that decision in rendering its own final decision (yes, I know – I never said this was a simple process).  If a taxpayer disagrees with the decision of the VAB, they may appeal the decision to the circuit court of the county in which their new homested is located, and that proceeding shall be de novo.

Assessed Values Down, But Property Taxes Up


I hate to say “I told you so,” but there it is.  The Sarasota Herald-Tribune reported today that Southwest Florida property owners are seeing their tax bills increase, despite receiving reductions in their assessed values due to the economy and the legislative machinations of the last two years.  The simple fact of the matter is that by limiting increases in the value of commercial property to no more than 10% per year, the legislature eroded much of the protection afforded homeowners by the Save Our Homes Amendment.

Owners of homestead property should take heed, as the legislature now wants to give commercial property virtually the same protections enjoyed by homestead property.  If that passes, the current protections in place for owners of homestead property will be essentially worthless.

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